A Guide to the Small Business Administration

One of the more important things that the federal government has ever done to help the little guy was to help level the playing field for federal contracts for small businesses. While there are some contracts that are just too much for small businesses to handle, a good portion of the roughly 11 million annual federal contracts are handled best by small businesses. 

The Small Business Administration was formed to facilitate getting more contracts out to small businesses. It also helps with the myriad issues that come up with starting a small business, growing a small business, and even helping small businesses recover from disasters. 

Let’s take a look at the SBA and what they can do for you. 

What is the Small Business Administration?

So, what exactly is the SBA? 

The SBA is nothing new. It was established in 1953 by the Eisenhower administration. The primary goal of the SBA was to offer aid to, counsel, assist, and even protect the interests of small businesses across the nation. The SBA does this by promoting and ensuring that they receive a fair portion of government contracts and sales of surplus property. 

During the early years of the SBA, it focused on providing small business loans, contracts, and management assistance. The agency morphed and became a vital source of support for all kinds of entrepreneurs across many industries. In 1964, the Economic Opportunity Act produced the Equal Opportunity Loan Program. This effectively expanded the reach of the SBA to small business owners who were socially or economically disadvantaged. 

Over the decades, the SBA's role and scope continued to grow and adjust. In the 1970s, the SBA’s 8(a) Business Development Program was created to help small disadvantaged businesses compete in the marketplace. In the 1980s, there was increased emphasis on disaster assistance and recovery for small businesses. 

Basically, the SBA has become a lending institution to help small businesses stay afloat when the economy is tanking, or they are otherwise compromised. 

Key Services and Programs Offered by the SBA

The SBA's services are divided into three distinct areas, which are laid out below. 

  1. Financial Assistance
  2. Contracting Assistance
    • Government Contracting Programs
    • 8(a) Business Development Program
    • HUBZone Program
    • Women-Owned Small Business (WOSB) Program
    • Service-Disabled Veteran-Owned Small Business (SDVOSB) Program
  3. Counseling and Training

For the sake of our industry, we focus on the second section, contracting assistance. In fact, Greenwood Aerospace is a HUBZone-certified small business. Because of our location, HUBZone certifies us to have access to certain contracts that are otherwise unavailable. 

How to Qualify for SBA Programs

First, you have to qualify for SBA programs. These are obviously only for small businesses, so your business must meet the guidelines for a small business. There is no set size because it varies from industry to industry. The SBA uses the North American Industry Classification System (NAICS) codes to set size standards based on either the number of employees or average annual receipts.

Some programs have specific staffing requirements. For example, in the 8(a) Business Development Program, the business must be at least 51% owned and controlled by socially and economically disadvantaged individuals. Similarly, for the Women-Owned Small Business (WOSB) and Economically Disadvantaged Women-Owned Small Business (EDWOSB) programs, the business must be at least 51% owned and controlled by women.

For us at Greenwood, the Historically Underutilized Business Zone (HUBZone) program requires a business to be located in a designated HUBZone and 35% of its employees to reside in a HUBZone. HUBZone maps are a great way to determine whether or not your business is eligible. In fact, using these maps is a great tool to see if an area is optimal for expansion or future business growth. 

Benefits of SBA Programs for Small Businesses

What are some of the advantages of SBA programs? More specifically, how has it benefitted Greenwood Aerospace?

Greenwood is located in an economically disadvantaged area, but through HUBZone, we are able to compete. While competing, we offer solid and steady employment to members of our local community. We cannot overstate how important this is, and it is the ultimate win/win. We, as a company, win because we have more equal footing for government procurement and aerospace contracts. 

Also, the SBA helps the local community by offering support for small businesses like Greenwood Aerospace, which we are able to then put back into our community. 

Challenges and Limitations

The SBA can be a useful tool for growing a small business, especially with government procurement, since it helps unlock contracting opportunities for certain small businesses. But it does not solicit contracts for you, nor does it ensure that small businesses actually deliver as advertised. Here are some of the main issues that small businesses run into when dealing with the SBA. 

Complex Application Process

Let’s be honest: nothing the federal government sets up is easy to apply for. It just isn’t, and it goes with the territory. The following are a few of the most common problems:

  • Most SBA programs require extensive documentation and detailed application forms, which can be daunting for small business owners with limited time and resources. It’s hard to justify spending time on endless forms when your main job is to keep cash flow coming in. 
  • The approval process for loans and certifications can be slow, leading to delays in receiving much-needed funding or contracting opportunities. Again, your job as the owner of a small business is capital and cash flow. Bureaucratic delays are antithetical to both. 

Eligibility Requirements

Meeting eligibility requirements is not a sure thing, even if you are definitely a small business by definition. See, these requirements change from industry to industry, so it is kind of a moving target. Also, meeting the eligibility criteria for certain programs, such as the 8(a) Business Development Program or HUBZone certification, can be difficult for some businesses to the point that it becomes a threshold to entry that they can’t really cross. 

Lack of Understanding

As with so many other programs, there is a fundamental lack of awareness about the SBA, who is eligible, and how to get started. Some owners are aware, but they don’t have the time to apply or misunderstand the overall process.  

This is far from an inclusive list of all the reasons why small businesses don’t fully utilize the SBA, but it hits the high notes. The SBA has a lot of good resources, but it takes work and effort to qualify, apply, and win aid. Many small business owners simply do not have the time to invest. 

Parting Thoughts

The SBA offers a lot of good opportunities for small business owners who qualify, but it isn’t for every small business. For one thing, it creates a whole new set of rules that you have to play by, and this isn’t for everyone. Also, your business might or might not even qualify. And even if it qualifies, that doesn’t mean that you want to be locked into a loan. 

For Greenwood Aerospace, HUBZone has increased our reach in securing government procurement contracts, but again, many businesses are not located in HUBZone qualifying areas. 

If you’d like to learn more about HUBZone, make sure to check out our article on it!