Small Business Administration - History

Small Business Administration - History

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Small Business Administration - independent federal agency in the executive branch. Created in 1953, it provides aid, advice, assistance and support to small businesses in the United States. In addition, the agency makes loans to small businesses, state and local developers and victims of floods and other disasters

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Records of the Small Business Administration [SBA]

Established: As an independent agency by the Small Business Act (67 Stat. 232), July 30, 1953.

Predecessor Agencies:

Functions: Provides financial assistance to small businesses and investment companies and to state and local development companies. Licenses and regulates small business investment companies.

Finding Aids: Forrest R. Holdcamper, comp., "Preliminary Inventory of the Records of the Small Business Administration," NC 71 (Sept. 1964).

Related Records: Record copies of publications of the Small Business Administration and its predecessor in RG 287, Publications of the U.S. Government.

309.2 Records of the Small Defense Plants Administration

History: Established by the Defense Production Act Amendments of 1951 (65 Stat. 131), July 31, 1951, to encourage small businesses to contribute to defense production. Abolished, effective July 31, 1953, by the Defense Production Act Amendments of 1953 (67 Stat. 131), June 30, 1953. Liquidation activities and prime contract administration transferred to the SBA by the Small Business Act of 1953, and EO 10504, December 1, 1953.

Textual Records: General correspondence, 1951-53. Sample case files relating to tax amortization, materials and equipment, contract procurement, certificates of competency, loans, and joint determination, 1951-53. General subject files, 1951-53. Records of Director of Contract Procurement Charles H. Swisher, relating primarily to the ammunition program, 1951-53.

309.3 General Records of the Small Business Administration

Textual Records: Administrative subjects files, 1953-72 (372 ft.). Administrative and correspondence files of the Administrator, 1982-83. Personal subject files of Administrator James C. Sanders, 1983-84. National directives, 1965-75 (300 fiche). Sample case files relating to applications for business loans that were declined, canceled, or withdrawn, 1954- 55. Minutes of meetings, and conference proceedings, of the National Advisory Council and of regional and state advisory groups, 1954-68. Advisory Council files, 1969-70. Minutes of the Loan Review Board, 1953-56. Research reports from SBA sponsored studies, 1961-62.

309.4 Records OF SBA Field Offices

309.4.1 Records of SBA Region I, Boston, MA (CT, ME, MA, NH, RI, VT)

Textual Records (in Boston): Advisory Council records maintained by the Concord, NH, District Office, 1971-74.

309.4.2 Records of SBA Region V, Chicago, IL (IL, IN, OH, MI, MN, WI)

Textual Records (in Chicago): Advisory Council records maintained by the Chicago District Office, 1974-77.

309.4.3 Records of SBA Region VI, Dallas, TX (AR, LA, NM, OK, TX)

Textual Records (in Fort Worth): Advisory Council records maintained by the Dallas, TX, Regional Office, 1972-82. General correspondence of district and community advisory councils, 1967- 70. Records relating to Disaster Field Offices, 1955-69.

309.4.4 Records of SBA Region X, Seattle, WA (AK, ID, OR, WA)

Textual Records (in Seattle): Advisory Council records maintained by the Boise, ID, District Office, 1966-72.

309.5 Motion Pictures (General)
74 reels

Informational and instructional films for prospective small business owners, covering such areas as advertising, marketing, employee relations, women in business, customer service, financial analysis, cash flow forecasting, recordkeeping, and theft prevention (75 reels).

309.6 Video Recordings (General)
ca. 1969, ca. 1975, 1980-89

"Pension," made for information and training, ca. 1969 (1 item). "Your Business Resource," explaining SBA mission and functions, ca. 1975 (1 item). Office of Advocacy productions, 1980-89 (25 items).

309.7 Sound Recordings (General)

"Structuring a State's Small Business Program," 1980 (3items).

309.8 Machine-Readable Records (General)
6 data sets

Loan Accounting Cash Collection System (LACCS) data files for the period 1968-88 and for fiscal years 1989 and 1990, consisting of public domain files and unsuppressed ("archives") files, with supporting documentation.

Bibliographic note: Web version based on Guide to Federal Records in the National Archives of the United States. Compiled by Robert B. Matchette et al. Washington, DC: National Archives and Records Administration, 1995.
3 volumes, 2428 pages.

This Web version is updated from time to time to include records processed since 1995.


Researchers and analysts of small or owner-managed businesses generally behave as if nominal organizational forms (e.g., partnership, sole-trader, or corporation), and the consequent legal and accounting boundaries of owner-managed firms are consistently meaningful. However, owner-managers often do not delineate their behavior to accord with the implied separation between their personal and business interests. Lenders also often contract around organizational (corporate) boundaries by seeking personal guarantees or accepting privately held assets as collateral. [1] Because of this behavior, researchers and analysts may wish to be cautious in the way they assess the organizational types and implied boundaries in contexts relating to owner-managed firms. These include analyses that use traditional accounting disclosures and studies that view the firm as defined by some formal organizational structure.

Concepts of small business, self-employment, entrepreneurship, and startup Edit

The concepts of small business, self-employment, entrepreneurship, and startup overlap to certain degree but also carry important distinctions. These four concepts are often conflated with each other.

Below are the key differences of these concepts in summary:

  • self-employment: an organization created with the primary intention to give a job to the founders, i.e. sole proprietor operations. : all new organizations. : a temporary new organization created to be bigger (at least have employees).
  • small business: an organization that is small (few employees) and may or may not have the intention to be bigger.

Many small businesses are sole proprietor operations consisting solely of the owner, but small businesses can also have a small number of additional employees. Some small businesses that offer an existing product, process or service, do not have growth as their primary objective. However, in contrast, a business that is created to become a big firm is known as a startup. Startups aim for growth and often offer an innovative product, process, or service. The entrepreneurs of startups typically aim to scale up the company by adding employees, seeking international sales, and so on, a process which is often but not always financed by venture capital and angel investments. Successful entrepreneurs have the ability to lead a business in a positive direction by proper planning, adapting to changing environments, and understand their own strengths and weakness. Spectacular success stories stem from startups that expanded in growth. Examples would be Microsoft, Genentech, and Federal Express which all embody the sense of new venture creation on small businesses. [2]

Self-employment provides works primarily for the founders. Entrepreneurship refers to all new businesses, including self-employment and businesses that never intend to grow big or become registered, but startups refer to new businesses that intend to grow beyond the founders, to have employees, and grow large.

Size definitions Edit

The legal definition of "small business" varies by country and by industry. In addition to several employees, methods used to classify small companies include annual sales (turnover), the value of assets and net profit (balance sheet), alone or as a combination of factors.

  • In India, all the manufacturing and service enterprises having investment "Not more than Rs 10 crore" and Annual Turnover "not more than Rs 50 crore" come under this category.
  • In the United States, the Small Business Administration establishes small business size standards on an industry-by-industry basis but generally specifies a small business as having fewer than 500 employees for manufacturing businesses and less than $7.5 million in annual receipts for most non-manufacturing businesses. [3][4] The definition can vary by circumstance—for example, a small business having fewer than 25 full-time equivalent employees with average annual wages below $50,000 qualifies for a tax credit under the health care reform bill Patient Protection and Affordable Care Act. [5] By comparison, a medium-sized business or mid-sized business has fewer than 500 employees.
  • The European Union generally defines a small business as one that has fewer than fifty employees and either turnover or balance sheet less than €10 m. [6] but the European Commission is undertaking a review of this definition. [7] By comparison, a medium-sized business has fewer than 250 employees and either turnover less than €50 m. or balance sheet less than €43 m. [6]
  • In Australia, a small business is defined by the Fair Work Act 2009 as one with fewer than fifteen employees. By comparison, a medium-sized business or mid-sized business has fewer than two hundred employees.
  • In South Africa, the National Small Business Amendment Act (Act 26 of 2003) defines businesses in a variety of ways using five categories previously established by the National Small Business Act (Act 102 of 1996), namely, standard industrial sector and subsector classification, size of class, equivalent of paid employees, turnover and asset value excluding fixed property. [8]

Small businesses are usually not dominant in their field of operation. [9]

The table below serves as a useful guide to business size nomenclature.

Business size definitions (by number of employees)

  • Most cells reflect sizes not defined in legislation.
  • Some definitions are multi-parameter, e.g., by industry, revenue, or market share.

Demographics Edit

In 2016 a study that examined the demographic of small business owners was published. The study showed that the median American small business owners were above the age of 50. The ages were distributed as 51% over 50 years old, 33% between the ages 35–49, and 16% being under the age of 35. As for sex: 55% were owned by males, 36% by females, and 9% being equal ownership of both males and females. As for race: 72% were white/Caucasian, 13.5% were Latinos, 6.3% were African American, 6.2% were Asian, and 2% as other. As for educational background: 39% had obtained a bachelor's degree or higher, 33% had some college background, and 28% received at least a high school diploma. [10]

The United States census data for the years 2014 and 2015 shows the women's ownership share of small businesses by firm size. The data explains percentages owned by women along with the number of employees including the owner. Generally, the smaller the business, the more likely it to be owned by a woman. The data shows that about 22% of small businesses with 100-500 employees were owned by women, a percentage that rises the smaller the business. 41% of businesses with just 2-4 employees were run by women, and in businesses with just one person, that person was a woman in 51% of cases. [10]

Franchise businesses Edit

Franchising is a way for small business owners to benefit from the economies of scale of the big corporation (franchiser). McDonald's and Subway are examples of a franchise. The small business owner can leverage a strong brand name and purchasing power of the larger company while keeping their own investment affordable. However, some franchisees conclude that they suffer the "worst of both worlds" feeling they are too restricted by corporate mandates and lack true independence. It is an assumption that small business is just franchisees, but the truth is many franchisers are also small businesses, Although considered to be a successful way of doing business, literature has proved that there is a high failure rate in franchising as well, especially in the UK, where research indicates that out of 1658 franchising companies operating in 1984, only 601 remained in 1998, a mere 36%. [11]

Retailers' cooperative Edit

A retailers' cooperative is a type of cooperative that employs economies of scale on behalf of its retailer members. Retailers' cooperatives use their purchasing power to acquire discounts from manufacturers and often share marketing expenses. They are often recognized as "local groups" because they own their own stores within the community. [12] It is common for locally-owned grocery stores, hardware stores, and pharmacies to participate in retailers' cooperatives. Ace Hardware, True Value, and NAPA are examples of a retailers' cooperative. Retail cooperatives also allow consumers to supply their own earnings and gain bargaining power outside of the business sector. [12] Retail cooperatives mainly reside within small communities where local businesses are often shut down. [12]

Many small businesses can be started at a low cost and on a part-time basis, while a person continues a regular job with an employer or provides care for family members in the home. In developing countries, many small businesses are sole-proprietor operations such as selling products at a market stall or preparing hot food to sell on the street, which provide a small income. In the 2000s, a small business is also well suited to Internet marketing because, it can easily serve specialized niches, something that would have been more difficult before the Internet revolution which began in the late 1990s. Internet marketing gives small businesses the ability to market with smaller budgets. Adapting to change is crucial in business and particularly small business not being tied to the bureaucratic inertia associated with large corporations, small businesses can respond to changing marketplace demand more quickly. Small business proprietors tend to be in closer personal contact with their customers and clients than large corporations, as small business owners see their customers in person each week.

One study showed that small, local businesses are better for a local economy than the introduction of new chain stores. By opening up new national level chain stores, the profits of locally owned businesses greatly decrease and many businesses end up failing and having to close. This creates an exponential effect. When one store closes, people lose their jobs, other businesses lose business from the failed business, and so on. In many cases, large firms displace just as many jobs as they create. [13]

Independence Edit

Independence is another advantage of owning a small business. A small business owner does not have to report to a supervisor or manager. Also, many people desire to make their own decisions, take their own risks, and reap the rewards of their efforts. Small business owners possess the flexibility and freedom to make their own decisions within the constraints imposed by economic and other environmental factors. [14] However, entrepreneurs have to work for very long hours and understand that ultimately their customers are their bosses.

Small businesses (often carried out by family members) may adjust quicker to the changing conditions however, they may also be closed to the absorption of new knowledge and employing new labor from outside. [15]

Financial reporting Edit

Small businesses benefit from less extensive accounting and financial reporting requirements than those faced by larger businesses. The European Union's Directive on annual financial statements of 2013 aims to "limit administrative burdens and provide for simple and robust accounting rules, especially for small and medium-sized enterprises (SMEs)". [16] In the UK, the Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 transposed the EU Directive into UK law and amended the reporting regime for reduced disclosure accounts for any accounting period commencing on or after 1 January 2016. [17] "Abbreviated accounts" were permitted for smaller entities under "FRSSE", the Financial Reporting Standard for Smaller Entities). Until 2015, companies deemed small under the UK Companies Act 2006 were allowed to use this standard. [18] For accounting years ending on or after 1 January 2016, FRSSE is no longer available, [19] but there are options known as "abridged accounts" and "filleted accounts":

  • Abridged accounts: accounting for profit / loss begins with the declaration of gross profit or loss, not turnover
  • Filleted financial statements or filleted accounts: profit and loss accounts are excluded, but balance sheet and balance sheet notes are to be disclosed.

Alternatively, the smallest companies are able to file "micro-entity accounts". [20]

Small businesses often face a variety of problems, some of which are related to their size. A frequent cause of bankruptcy is under capitalization. This is often a result of poor planning rather than economic conditions. It is a common rule of thumb that the entrepreneur should have access to a sum of money at least equal to the projected revenue for the first year of business in addition to his or her anticipated expenses. For example, if the prospective owner thinks that he or she will generate 100,000 in revenues in the first year with 150,000 in start-up expenses, then he or she should have not less than 250,000 available. Start-up expenses are often grossly underestimated adding to the burden of the business. Failure to provide this level of funding for the company could leave the owner liable for all of the company's debt should he or she end up in bankruptcy court, under the theory of undercapitalization.

In addition to ensuring that the business has enough capital, the small business owner must also be mindful of contribution margin (sales minus variable costs). To break even, the business must be able to reach a level of sales where the contribution margin equals fixed costs. When they first start, many small business owners underprice their products to a point where even at their maximum capacity, it would be impossible to break even. Cost controls or price increases often resolve this problem.

In the United States, some of the largest concerns of small business owners are insurance costs (such as liability and health), rising energy costs, taxes, and tax compliance. [21] In the United Kingdom and Australia, small business owners tend to be more concerned with perceived excessive governmental red tape. [22]

Contracting fraud has been an ongoing problem for small businesses in the United States. Small businesses are legally obligated to receive a fair portion (23 percent) of the total value of all the government's prime contracts as mandated by the Small Business Act of 1953. Since 2002, a series of federal investigations have found fraud, abuse, loopholes, and a lack of oversight in federal small business contracting, which has led to the diversion of billions of dollars in small business contracts to large corporations.

Another problem for many small businesses is termed the 'Entrepreneurial Myth' or E-Myth. The mythic assumption is that an expert in a given technical field will also be an expert at running that kind of business. Additional business management skills are needed to keep a business running smoothly. Some of this misunderstanding arises from the failure to distinguish between small business managers as entrepreneurs or capitalists. While nearly all owner-managers of small firms are obliged to assume the role of capitalist, only a minority will act as entrepreneurs. [23] The line between an owner-manager and an entrepreneur can be defined by whether or not their business is growth-oriented. In general, small business owners are primarily focused on surviving rather than growing therefore, not experiencing the five stages of the corporate life cycle (birth, growth, maturity, revival, and decline) as an entrepreneur would. [24]

Another problem for many small businesses is the capacity of much larger businesses to influence or sometimes determine their chances for success. Business networking and social media has been used as a major tool by small businesses in the UK, but most of them just use a "scattergun" approach in a desperate attempt to exploit the market which is not that successful. [25] Over half of small firms lack a business plan, a tool that is considered one of the most important factors for a venture's success. Business planning is associated with improved growth prospects. Funders and investors usually require a business plan. A plan also serves as a strategic planning document for owners and CEOs, which can be used as a "bible" for decision-making [26]

An international trade survey indicated that the British share of businesses that are exporting rose from 32% in 2012 to 39% in 2013. Although this may seem positive, in reality, the growth is slow, as small business owners shy away from exporting due to actual and perceived barriers. Learning the basics of a foreign language could be the solution to open doors to new trade markets, it is a reality that not all foreign business partners speak English. China is stated to grow by 7.6% in 2013 and still, 95% of business owners who want to export to China have no desire and no knowledge to learn their local language. [27]

Bankruptcy Edit

When small business fails, the owner may file for bankruptcy. In most cases, this can be handled through a personal bankruptcy filing. [28] Corporations can file bankruptcy, but if it is out of business and valuable corporate assets are likely to be repossessed by secured creditors, there is little advantage to going to the expense of a corporate bankruptcy. [29] [30] Many states offer exemptions for small business assets so they can continue to operate during and after personal bankruptcy. [31] However, corporate assets are normally not exempt hence, it may be more difficult to continue operating an incorporated business if the owner files bankruptcy. [32] Researchers have examined small business failures in some depth, with attempts to model the predictability of failure. [33] [34]

Social responsibility Edit

Small businesses can encounter several problems related to engaging in corporate social responsibility, due to characteristics inherent in their size. Owners of small businesses often participate heavily in the day-to-day operations of their companies. This results in a lack of time for the owner to coordinate socially responsible efforts, such as supporting local charities or not-for-profit activities. [35] Additionally, a small business owner's expertise often falls outside the realm of socially responsible practices, which can contribute to a lack of participation. Small businesses also face a form of peer pressure from larger forces in their respective industries, making it difficult to oppose and work against industry expectations. [35] Furthermore, small businesses undergo stress from shareholder expectations. Because small businesses have more personal relationships with their patrons and local shareholders, they must also be prepared to withstand closer scrutiny if they want to share in the benefits of committing to socially responsible practices or not. [35]

Job quality Edit

While small businesses employ over half the workforce in the US [36] and have been established as a main driving force behind job creation, [37] the quality of the jobs these businesses create has been called into question. Small businesses generally employ individuals from the Secondary labor market. As a result, in the U.S., wages are 49% higher for employees of large firms. [37] Additionally, many small businesses struggle or are unable to provide employees with benefits they would be given at larger firms. Research from the U.S. Small Business Administration indicates that employees of large firms are 17% more likely to receive benefits including salary, paid leave, paid vacation, bonuses, insurance, and retirement plans. [38] Both lower wages and fewer benefits combine to create a job turnover rate among U.S. small businesses that is three times higher than large firms. [37] Employees of small businesses also must adapt to the higher failure rate of small firms, which means that they are more likely to lose their job due to the firm going under. In the U.S. 69% of small businesses last at least two years, but this percentage drops to 51% for firms reaching five years in operation. [36] The U.S. Small Business Administration counts companies with as much as $35.5 million in sales and 1,500 employees as "small businesses", depending on the industry. Outside government, companies with less than $7 million in sales and fewer than five hundred employees are widely considered small businesses.

Cyber crime Edit

Cybercrime in the business world can be broken down into 4 main categories. They include loss of reputation and consumer confidence, cost of fixing the issue, loss of capital and assets, and legal difficulties that can come from these problems. Loss of reputation and consumer confidence can be impacted greatly after one attack. Many small businesses will struggle to gain confidence and trust in their customers after being known for having problems prior. The cost of fixing the cyber attack would require experts outside of their field to further the investigation and find the problem. Being down for a business means losing money at the same time. This could halt the online operations and mean the business could potentially be down for a long period of time. Loss of capital and assets ties well in with the cost of fixing the issue. During a cyberattack, a business may lose its funds for that business. Worst-case scenario, a business may actually lose all its working capital and funds. The legal difficulties involved with cybercrime can become pricy and hurt the business itself for not having standard security measures and standards. Security not only for the business but more importantly the customer should be the number one priority when dealing with security protocol. [39]

The monetary dollar damage caused by cybercrime in 2016 equaled out to be over 1.33 billion dollars in the United States alone. In 2016, California alone had over 255 million dollars reported to the IC3. The average company this year in the United States amounted to 17.36 million dollars in cybercrime attacks. Certain cyber attacks can vary on how long it takes to solve a problem. It can take upwards to 69 days for an average everyday attack on a business. The types of attacks include viruses and malware issues. Employee activities within the workspace can also render a cyber attack. Employees using mobile devices or remote work access off the job makes it easier for a cyber attack to occur. [40]

Although small businesses have close relationships with their existing customers, finding new customers and reaching new markets is a major challenge for small business owners. Small businesses typically find themselves strapped for time to do marketing, as they have to run the day-to-day aspects of the business. To create a continual stream of new business and find new clients and customers, they must work on marketing their business continuously. Low sales (the result of poor marketing) is one of the major reasons for small business failure. Common marketing techniques for small business include business networking (e.g., attending Chamber of Commerce events or trade fairs), "word of mouth" promotion by existing customers, customer referrals, Yellow pages directories, television, radio, and outdoor ads (e.g., roadside billboards), print ads, and Internet marketing. TV ads can be quite expensive, so they are normally intended to create awareness of a product or service. Another means by which small businesses can advertise is through the use of "deal of the day" websites such as Groupon and Living Social. These Internet deals encourage customers to patronize small businesses.

Many small business owners find internet marketing more affordable. Google AdWords and Yahoo! Search Marketing are two popular options of getting small business products or services in front of motivated web searchers. Social media has also become an affordable route of marketing for small businesses. It is a fraction of the cost of traditional marketing and small businesses can do it themselves or find small social marketing agencies that they can hire out for a small fee. Statistically, social media marketing has a higher lead-to-close rate than traditional media. [ citation needed ] Successful online small business marketers are also adept at utilizing the most relevant keywords in their website content. Advertising on niche websites that are frequented by potential customers can also be effective, but with the long tail of the Internet, it can be time-intensive to advertise on enough websites to garner an effective reach.

Creating a business website has become increasingly affordable with many do-it-yourself programs now available for beginners. A website can provide significant marketing exposure for small businesses when marketed through the Internet and other channels. Some popular services are WordPress, Joomla, Squarespace, and Wix. Social media has proven to be very useful in gaining additional exposure for many small businesses. Many small business owners use Facebook and Twitter as a way to reach out to their loyal customers to give them news about specials of the day or special coupons, generate repeat business and reach out to new potential clients. The relational nature of social media, along with its immediacy and twenty-four-hour presence lend an intimacy to the relationships small businesses can have with their customers while making it more efficient for them to communicate with greater numbers. Facebook ads are also a very cost-effective way for small business owners to reach a targeted audience with a very specific message. In addition to the social networking sites, blogs have become a highly effective way for small businesses to position themselves as experts on issues that are important to their customers. This can be done with a proprietary blog and/or by using a back-link strategy wherein the marketer comments on other blogs and leaves a link to the small business' own website. Posting to a blog about the company's business or service area regularly can increase web traffic to a company website.

  • Market research – To produce a marketing plan for small businesses, research needs to be done on similar businesses, which should include desk research (done online or with directories) and field research. This gives an insight into the target group’s behavior and shopping patterns. Analyzing the competitor’s marketing strategies makes it easier for small businesses to gain market share.
  • Marketing mix[41] – Marketing mix is a crucial factor for any business to be successful. Especially for a small business, examining a competitor’s marketing mix can be very helpful. An appropriate market mix, which uses different types of marketing, can help to boost sales.
  • Product life cycle[42] – After the launch of the business, crucial points of focus should be the growth phase (adding customers, adding products or services, and/or expanding to new markets) and working towards the maturity phase. Once the business reaches the maturity stage, an extension strategy should be in place. Re-launching is also an option at this stage. Pricing strategy should be flexible and based on the different stages of the product life cycle.
  • Promotion techniques – It is preferable to keep promotion expenses as low as possible. ‘Word of mouth’, ‘email marketing’, ‘print-ads’ in local newspapers, etc. can be effective.
  • Channels of distribution – Selecting an effective channel of distribution may reduce the promotional expenses as well as overall expenses for a small business.

In the US, small businesses (fewer than five hundred employees) account for more than half the non-farm, private GDP and around half the private sector employment. [36] Regarding small business, the top job provider is those with fewer than ten employees, and those with ten or more but fewer than twenty employees comes in as the second, and those with twenty or more but fewer than one hundred employees comes in as the third (interpolation of data from the following references). [43] The most recent data shows firms with fewer than twenty employees account for slightly more than 18% of the employment. [44]

According to "The Family Business Review", "there are approximately seventeen million sole-proprietorship in the US. It can be argued that a sole-proprietorship (an unincorporated business owned by a single person) is a type of family business" and "there are twenty-two million small businesses (fewer than five hundred employees) in the US and approximately 14,000 big businesses". Also, it has been found that small businesses created the newest jobs in communities, "In 1979, David Birch published the first empirical evidence that small firms (fewer than 100 employees) created the newest jobs", and Edmiston claimed that "perhaps the greatest generator of interest in entrepreneurship and small business is the widely held belief that small businesses in the United States create most new jobs. The evidence suggests that small businesses indeed create a substantial majority of net new jobs in an average year." The U.S. Small Business Administration has found small businesses have created two-thirds of net new private-sector jobs in the US since 2007. [45] Local businesses provide competition to each other and also challenge corporate giants. Of the 5,369,068 employer firms in 1995, 78.8 percent had fewer than ten employees, and 99.7 percent had fewer than five hundred employees. [46]

Small businesses use various sources available for start-up capital:

  • Self-financing by the owner through cash savings, equityloan on his or her home, and or other assets
  • Loans or financial gifts from friends or relatives
  • Grants from private foundations, government, or other sources
  • Private stock issue
  • Forming partnerships
  • Loans from banks, credit unions, or other financial institutions , including collateral-based lending and venture capital, given sufficiently sound business venture plans

Some small businesses are further financed through credit card debt—usually a risky choice, given that the interest rate on credit cards is often several times the rate that would be paid on a line of credit at a bank or a bank loan and terms can change unpredictably. [47] [48] Recent research suggests that the use of credit scores in small business lending by community banks is surprisingly widespread. Moreover, the scores employed tend to be the consumer credit scores of the small business owners rather than the more encompassing small business credit scores that include data on the firms as well as on the owners. [49] Many owners seek a bank loan in the name of their business however, banks will usually insist on a personal guarantee by the business owner.

On October 2010, Alejandro Cremades and Tanya Prive founded the first equity crowdfunding platform [50] for small businesses in history as an alternative source of financing. The platform operates under the name of Rock The Post. [51]

Several organizations in the United States also provide help for the small business sector, such as the Internal Revenue Service's Small Business and Self-Employed One-Stop Resource. [52] The Small Business Administration (SBA) runs several loan programs that may help a small business secure loans. In these programs, the SBA guarantees a portion of the loan to the issuing bank, and thus, relieves the bank of some of the risk of extending the loan to a small business. The SBA also requires business owners to pledge personal assets and sign as a personal guarantee for the loan. The 8(a) Business Development Program assists in the development of small businesses owned and operated by African Americans, Hispanics, and Asians. [53]

Canadian small businesses can take advantage of federally funded programs and services. See Federal financing for small businesses in Canada (grants and loans).

In the United Kingdom, the Small Business Commissioner (SBC) provides information and advice for small businesses and deals with complaints resolution with specific reference to late payment problems and other unfavourable payment practices. The SBC's role is to make non-binding recommendations advising on how the parties can resolve a dispute. [54]

Small businesses are also encouraged per public policy on taxation. For example, from January 1, 2020, Armenia introduced a special micro-entrepreneurship tax system with a non-taxable base of 24 million AMD. Accordingly, a micro-business will be exempted from taxes other than income tax which will not exceed 5,000 AMD per employee. [55]

Small businesses often join or come together to form organizations to advocate for their causes or to achieve economies of scale that larger businesses benefit from, such as the opportunity to buy cheaper health insurance in bulk. These organizations include local or regional groups such as Chambers of Commerce and independent business alliances, as well as national or international industry-specific organizations. Such groups often serve a dual purpose, as business networks to provide marketing and connect members to potential sales leads and suppliers, and also as advocacy groups, bringing together many small businesses to provide a stronger voice in regional or national politics. In the case of independent business alliances, promoting the value of locally owned, independent business (not necessarily small) through public education campaigns is integral to their work.

The largest regional small business group in the United States is the Council of Smaller Enterprises, located in Greater Cleveland. [56]

United Kingdom Trade and Investment gives out research in different markets around the world, and research in program planning and promotional activities to exporters. The BEXA's (British Exporters Association) role is to connect new exporters to expert services. It can provide details about regional export contacts, who could be made informally to discuss issues. Trade associations and all major banks often provide links to international groups in foreign markets, and some help set up joint ventures and trade fairs. [57]

Several youth organizations, including 4-H, Junior Achievement, and Scouting, have interactive programs and training to help young people run their own small business under adult supervision. [58]

Small Business Administration - History

The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns to preserve free competitive enterprise and to maintain and strengthen the overall economy of our Nation. Small business is critical to our economic recovery, to building America's future, and to helping the United States compete in today's global marketplace.

Our vision for the SBA revolves around two principles: customer-driven outreach and quality-focused management. We are determined to reach out to small businesses in an unprecedented way to listen to their needs, to report these needs back to President Clinton, and to suggest appropriate initiatives to help small businesses. We also recognize the need to change our management culture, our organizational structure, and the way we do business to improve the quality of our work. Through these changes, we will create a more entrepreneurial, customer-driven, and efficient SBA.

How Did Bank Lending to Small Business in the United States Fare After the Financial Crisis?

Since the financial crisis, researchers have examined the health of the small business credit market. Bank credit is the form of credit most commonly used by small businesses, and it contracted sharply during the financial crisis years of 2009-2011. Building upon previous literature, this study is a follow-up to the author’s 2012 study. That research analyzed the financial crisis and time period preceding it, and it demonstrated that the decline in bank lending was much more acute for small businesses than for larger firms during the crisis.

This study, analyzing the time period after the financial crisis, assesses changes in bank credit to small businesses and to all businesses to determine whether bank lending to small businesses recovered to pre-crisis levels after the crisis. The study also tests whether there were significant differences in the lending behavior of large vs. small banks and of troubled vs. healthy banks. The decline in the number of banks—including the drop in community banks—during and after the crisis makes it difficult to determine if banks have continued the tight-credit policies of 2009–2011, or if they have eased them. The study defines small business loans as loans of $1 million or less as reported in the data from the FFIEC. The information available does not make it possible to distinguish SBA-guaranteed loans.

Overall Findings

Prior to the financial crisis, both small business loans and total business loans grew at double-digit rates, but small business loans grew only about half as fast at large banks as at small banks (Figure 1). Loan growth was greater for small business loans prior to the crisis, and the decline in lending was greater for small business loans during and after the crisis. (Figure 2)

SBA Excludes Small Business Owners With Criminal Records From Relief Loans

In order to provide a lifeline to small businesses struggling in the wake of the Covid-19 pandemic, Congress created the Paycheck Protection Program (PPP). Signed in late March as part of the sweeping CARES Act, Congress has so far authorized more than $650 billion for the program, which is being implemented by the Small Business Administration (SBA). Unfortunately, the SBA has crafted several “interim final rules” that unfairly deny loans to countless entrepreneurs.

In a comment letter submitted to the Administration earlier this month, the Institute for Justice Clinic on Entrepreneurship at the University of Chicago blasted the SBA's “exclusionary provisions,” which threaten to “arbitrarily wipe out all that these entrepreneurs have built.” Worse, the PPP rules go far beyond what Congress actually authorized and “run contrary to the intent and text of the CARES Act.”

First, the SBA automatically disqualifies small businesses from receiving PPP loans if any significant shareholder (i.e. who owns at least 20% of the company) has been convicted of any felony within the past five years, no matter if the crime is completely irrelevant to someone's creditworthiness. Moreover, the SBA denies loans to owners who are currently facing any criminal charges (even misdemeanors), a policy that eviscerates the presumption of innocence.

With disqualifications so ludicrously broad, the SBA is barring many otherwise qualified small business owners from relief, based on criteria that aren’t directly related to the public interest. And denying loan relief to a small-business owner doesn't just affect the entrepreneur, but can trigger a cascading effect that impacts their employees, business partners, and customers.

The SBA’s “blanket prohibition on lending” harms entrepreneurs with criminal records like Jimmie Williams. After circling in and out of prison for years, Williams decided to get his life back on track. Unfortunately, gainful employment was hard to come by. Despite applying to literally hundreds of different jobs, his criminal record prevented him from getting his foot in the door. So Williams decided to become his own boss and founded Urban Root Inc., a snow removal and lawn care business in Chicago that regularly hires other ex-offenders. “It was easier to start a company than to get a job,” he recounted.

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Second, the SBA conditions forgiveness eligibility by requiring PPP loan recipients to spend at least 75% of their loans on payroll. But this 75% rule was never authorized by Congress in fact, it doesn’t even appear anywhere in the CARES Act itself. Such a rigid restriction ignores how rent and utilities rival payroll costs for many small businesses, like coffeeshops, restaurants, and salons.

Fortunately, the SBA’s regulations have triggered a massive backlash that cuts across partisan lines. According to the Collateral Consequences Research Center, which was one of the first groups that sounded the alarm about the PPP excluding ex-offenders, at least 65 organizations have submitted comments criticizing the interim final rule, including groups like the ACLU, Americans for Prosperity, Drug Policy Alliance, and FreedomWorks.

Multiple Members of Congress, from both sides of the aisle, have urged the SBA to revise its regulations and have sponsored legislative fixes. Earlier this month, the House of Representatives passed the HEROES Act, which would override the SBA’s exclusionary policies, while in the Senate, Sens. Marco Rubio (R-FL) and Ben Cardin (D-MD) are working with the Treasury Department on a rule change.

“Red tape created by the Small Business Administration is making it impossible for many worthy businesses to get access to the emergency loans created by Congress,” said IJ Clinic Associate Director Amy Hermalik. “These regulatory hurdles, not written in the law, fall especially hard on black and Latino and low-income business owners. There are worthy businesses that would be excluded if the SBA doesn’t rethink its restrictions.”

1201 Borrower Payments

  • Before You Begin
  • Complete Agency Form
  • Enter Payment Info
  • Review & Submit
  • Confirmation

About this form

Borrowers use this form to pay your SBA serviced loan payments, including Economic Injury Disaster loans (EIDL) and other non-COVID Disaster loans. The 10-digit SBA loan number and payment amount are required to complete this form. DO NOT use this form to pay Payroll Protection Program loans or EIDL Advances/Grants. For more information see below.

Please take a moment to review some frequently asked questions and common situations that users have:

  • You first have to log into the profile that you have created and is separate from the SBA system.
  • You then complete the 1201 Borrower Form and choose ACH as the payment method. The option to do a onetime payment or recurring payment will be visible on the Enter Payment Info tab.

Accepted Payment Methods:

This is a secure service provided by United States Department of the Treasury. The information you will enter will remain private. Please review our privacy policy for more information.

Social Security

External Commitment to Small Business Statement:

At the Social Security Administration (SSA), we are committed to advancing our small business procurement program, and our Office of Small and Disadvantaged Business Utilization will continue its advocacy for small businesses.

Our goal is to provide maximum practicable opportunities in SSA acquisitions to small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns.

We will ensure that every small business concern wishing to do business with us has the necessary knowledge about our program requirements to participate as either a prime contractor or subcontractor.

We will achieve our small business goals by considering potential small business contracting opportunities during the acquisition process, and we will work with small businesses to reduce unnecessary barriers to attract new vendors and enhance competition.

The Office of Small and Disadvantaged Business Utilization (OSDBU) was established in October 1979 pursuant to Public Law 95-507, which assigned it the task of fostering the use of small and disadvantaged businesses as Federal contractors. To accomplish this task, the OSDBU develops and implements appropriate outreach programs aimed at heightening the awareness of the small business community to the contracting opportunities available within SSA. Outreach efforts include activities such as sponsoring small business fairs and procurement conferences, as well as participating in trade group seminars, conventions, and other forums which promote the utilization of small and disadvantaged businesses as contractors.

The OSDBU encourages buyers and program officials to consider small businesses, and to support all the socio-economic contracting programs in place under the Federal Acquisition Regulations.

If you have any questions concerning SSA's contracting opportunities under the socio-economic programs, please contact Leslie Ford.

This document provides instructions on how vendors can submit information to be included in the newly created SSA vendor database. This database will be used for COTR market research.

Recent SSA Headquarters Contracting History

This is a listing of awards made by the Office of Acquisition and Grants, the contracting office for the Social Security Administration.


If your firm is a small business or minority business enterprise, we encourage you to register in the System for Award Management (SAM) , formally the Central Contractor Registration (CCR) Database. SSA uses SAM as the primary database to identify small and disadvantaged businesses to fulfill our requirements.

Small Business Goals

Fiscal Year 2020 Small Business Prime and Subcontract Goals for the Social Security Administration

Categories Prime Goal Sub Goal
Small Business 27.00% 50.00%
Small Disadvantaged Business 5.00% 5.00%
Women Owned Small Business 5.00% 5.00%
Service Disabled Veteran Owned Small Business 3.00% 3.00%
HUBZone 3.00% 3.00%


The Social Security Administration FY19 scorecard will be published on the website: immediately after the release.

For historic Social Security Administration scorecard, please select from the list below:


Wayne McDonald accepting recognition for
receiving an "A" grade for Social Security's
2016 Small Business Scorecard.

Leslie Ford, Director
Office of Small and Disadvantaged Business Utilization
1540 Robert M. Ball Building
6401 Security Blvd.
Baltimore, Maryland 21244

Voice Mail: (410) 594-0111
FAX: (410) 965-2965
Email: [email protected]

SSA Monthly Vendor Outreach Sessions

The Social Security Administration's OSDBU hosts a monthly vendor outreach session. Outreach sessions provide counseling and guidance necessary for successful participation in the federal acquisition process.


"As is true with venture capitalists in general, SBICs have divergent philosophies and operating policies," wrote Art DeThomas in Financing Your Small Business. "Some specialize in equity financing while others provide debt financing in several different forms. This latter group of SBICs is the richest source of debt financing for small businesses outside commercial banks." Small business owners, however, need to weigh several factors before making a loan arrangement with an SBIC.

Entrepreneurs and small business owners seeking financing from SBICs first need to determine how many options they have. Regional SBA offices maintain information on SBICs that operate in their areas, and while they do not provide guidance in directing businesses to particular SBICs, they can give information on the industries and types of investments in which area SBICs have historically shown interest. In addition, a free directory of SBICs is available through the National Association of SBICs.

As many experts note, small businesses should narrow their search for a suitable SBIC by eliminating those that do not provide the business's desired financing route or display adequate management experience in the industry in which the business is involved. Analysts also caution small business owners not to rush through the decision making process. Given the latitude that SBICs have in shaping their loan policies, individual SBICs often maintain dramatically varied lending policies. Entrepreneurs and small business owners should take the time to find the program that best meets their needs.

Business consultants also encourage prospective borrowers to negotiate the best possible loan agreement for themselves when talking with SBICs. "Aside from the specifics of SBIC lending that are mandated by existing law or regulation," noted DeThomas, "particulars such as interest rate, maturity, equity participation, and collateral requirements can be negotiated. In general, the more attractive your firm as a financing opportunity — that is, the stronger the business plan — the more negotiating leverage you possess."

Effects of the COVID-19 Pandemic on Small Business

No event in U.S. history has had such a destructive impact on American small businesses as the coronavirus COVID‐19 pandemic that began in late January 2020. The effects of the many state and local customer access limits, social-distancing orders, and temporary closure mandates enacted in hopes of stopping the spread of COVID‐19 were especially disastrous for small business owners.

According to the April 2020 Current Population Survey from the U.S. Bureau of Labor Statistics, the number of active small business owners in the United States fell by 3.3 million or 22% during just the first three months of the pandemic, from February to April 2020. The drop in active businesses was the largest in history, with minority-owned businesses suffering the worst. Black-owned businesses were hit especially hard experiencing a 41% decrease in business activity. Latinx-owned business activity fell by 32%, and Asian business owner activity dropped by 26%. Immigrant-owned business owners experienced substantial losses of 36%. Female-owned businesses were also disproportionately hit suffering a 25% drop in business activity.

Economic analysts fear that many of the temporary small business closures will become permanent because of the inability of owners to pay ongoing expenses and survive the shutdown, despite federal government efforts like the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Enacted in March 2020, the CARES Act provided over $2 trillion in loans, grants, and enhanced unemployment compensation benefits intended to help business owners and employees survive the public health and economic impacts of COVID-19.