“Small Businesses Do Not Receive the Recognition They Deserve”

Maria Contreras-Sweet runs the Small Business Administration. She is the only Latina in the cabinet of President Barack Obama, and last week she was in several cities to commemorate the work of small businesses: San Francisco, Boston, Los Angeles, Phoenix and New York were part of her journey. On her agenda in the Big Apple, she included a meeting with this newspaper.

What is Small Business Week?

It is an opportunity to celebrate these businessmen and businesswomen. Frankly, I find it disturbing that small businesses, which are responsible for creating most of the jobs in the country, do not receive the recognition they deserve for it.

The business sector is chosen for different reasons, sometimes because you get the professional roof in a company, sometimes because they cannot get work in a company, often because they have a passion to do something, or has created something, they had an idea, perhaps because extra income is needed.  Our business community is diverse but what they have in common is that they create the most jobs.

Does the activity of these companies remain high?

In the SBA, loans are rising and contracts, in terms of quantities, are at record levels.  We have not had a similar peak in history.

Why this increase?

We have been working on how to improve services, technology we use to connect, for example, with the banks.  Now the SBA LINC program allows a person who is interested in a loan avoid knocking different banks doors and have to embark on a slow process where he will receive ambiguous answers in many cases. This technology, he has an answer within 48 hours.  In less than a year we have made over 30,000 contacts. We have also lowered our costs and we zero commissions for loans of less than $ 150,000.

Yet there are many companies seeking new funding sources

Today, small businesses are seeking funding in new ways, through unconventional channels on the Internet and we are studying the impact of these operations. They are loans from organizations like Kabagge, On Deck … for example. We want to help because some loans on the Internet are very expensive.  What we’re trying to do is to meet with them and identify the most competitive.

In the SBA, we are not regulatory, but we want to encourage these loans if they are rational from the point of view of cost.  One example is that Grameen Bank approached us but we told them we were not comfortable with their interest rates and could not promote them. We asked Grammen to adjust their rates on loans and they agreed so we succeeded.

We are not regulatory but we can impact the market for which we are, businesses want to be affiliated with the SBA and we want the cost of capital to be more reasonable for the entrepreneurial community.

We have added access to web and SBA services in Spanish which is a help for Latinos.

We want to approach more and more entrepreneurs, Latinos, women, LGBT community, people in jail….  I think it is working. When I got this job, I wanted all resources to be easy and accessible and, in addition, employers to be encouraged to export. I just came from Argentina, the country number 20 that joins our network of Small Business of the Americas. That makes the SBA the largest business advice network accessible in two dozen countries in the Western Hemisphere. These are connections that help make bigger teams and work effectively.

How can small businesses become more competitive when, for example, the labor market is tense and is more expensive to hire?

Small businesses want to be competitive and provide the same benefits large corporations offer and we are helping with that. I think the rise in the minimum wage, which the president is pushing, helps them be more effective. In addition we are helping and training them to manage their capital more effectively, using their cash flow properly.  The president has launched a program called Quick Pay that allows a small business to collect in 14 days any contract with the Federal Government.

They normally pay the small businesses in 60, 90 or 120 days and this forces them to ask for loans that are expensive. Its financing is more expensive.  When paid in 14 days you have a better cash flow. And if a company is doing business with a large corporation that in turn is contracted by the Government, it will also pay in 14 days if the corporation pays small businesses that subcontract in the same period. This cash injection helps improve the management of small businesses.

What is done locally?

We’re doing a partnership with a national league of cities so people who are starting a business or need permits and licenses can access and request them online in one day, having not to go from office to office. It is the Startup in a Day initiative and we are happy with the results. We have the mayors of Los Angeles, San Francisco, Boston and other cities working in this objective.

What is the challenge of Latino entrepreneurs that you are more interested in solving?

Something I can tell my successor is that I’m very proud of loans records but, in the future, the most important thing is to insist on financial education. It is not only how to raise capital but how to manage it effectively. As a banker I have granted loans to see then how they have been used in ways that do not make sense and sink their businesses.

I think this education is very important.  I contacted ALPFA (Association of Latino Professionals for America) and I have proposed a partnership to go to colleges and start instilling knowledge.  They can be taught very easily basic concepts.  I would be interested in making a team with the Department of Education to make this in a more formal way.