The Little Guys Are in Good Company, Thanks to the SBA
If groups like the Valley Economic Development Center are out in the field helping San Fernando Valley firms get the advice and money they need to grow, then the U.S. Small Business Administration is behind the lines providing strategy and financial resources that make much of the effort possible.
In many ways, the SBA is the glue that holds together the region’s wide range of small business outreach programs.
In the Valley area, consulting programs supported in part or completely by the SBA include small business development centers in Van Nuys and Glendale, and also in neighboring Ventura; a Glendale-based center where owners of small businesses can get advice from retired executives; and an export development center in Ventura.
In the current fiscal year, the federal agency provided more than $500,000 in funding for the small business development centers in Van Nuys and Ventura, and it gave office space and $30,000 for the Glendale-based Los Angeles chapter of the Service Corps of Retired Executives program.
In the lending arena, the SBA also backs dozens of banks and lenders that do business in the Valley, guaranteeing their loans to small firms that otherwise might not qualify for conventional financing.
Last year, the SBA locally backed $688 million in loans in Los Angeles, Ventura and Santa Barbara counties, with an average loan size of $240,000, said Alberto G. Alvarado, director of the SBA’s Los Angeles district office. He described the SBA as a catalyst in fostering small business development locally.
“We view our role as advocating the development of partnerships in communities, like in the Valley, for example, with lending institutions, commercial lenders, community organizations and groups of businesspeople,” he said. “What we try to do is bring those entities together--and find ways we can collaborate and work together.”
One of the SBA’s main partners in the Valley is the VEDC, which staffs and runs the Small Business Development Center in Van Nuys under contracts with the SBA and California Trade and Commerce Agency.
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“We have a close relationship with the SBA,” said Wilma Bergland, director of the Van Nuys center. “In the San Fernando Valley, we have expertise in developing grass-roots programs for the community. We’re like outreach technical assistance for the SBA.”
The SBA also funds and supports SCORE, a network of retired business executives that offers counseling and seminars for small business owners. Within the Valley, SCORE has five counselors at its Glendale office each weekday and gives 10 seminars there a month, said Allan Sher, chairman of the local chapter.
The group also offers counseling by appointment at various Valley chambers of commerce, including Canoga Park, Woodland Hills, Van Nuys and North Hollywood.
On the funding side, the SBA relies on a network of banks and other lenders doing business in the Valley to find promising companies that may lack the history or financial savvy to qualify for conventional financing.
One of the Valley’s biggest SBA lenders is California Statewide Certified Development Corp., a financial institution that engages exclusively in SBA lending. The CDC will make an estimated $50 million in SBA-backed loans to small businesses this year, said Executive Director Barbara Vahryzek.
About 20% will go to Valley-based businesses, she added.
“In the San Fernando Valley, [borrowers] tend to be in manufacturing, assembly, and we have a lot of high-tech companies that fall in that category as well,” she said. “There’s also distribution. Sizewise, they probably have sales on the low end of $500,000 to $600,000 and on the top end of $8 million. They can range anywhere form 10 to 150 employees.”
She said the roles of financial institutions such as California Statewide and organizations like the VEDC are very different from that played by the SBA.
“The SBA cannot be in the trenches because they don’t have enough people,” she said. “The SBA needs to form alliances, and that’s what we and the VEDC do. The SBA is more like an oversight body that sets policy and has financial resources.”
The SBA received its authority to guarantee loans and provide counseling services for small businesses through two federal Small Business Acts, one established in 1953 and the other in 1958, Alvarado said.
The legislation also authorized the SBA to serve as intermediary in finding applicants to fulfill government contracts set aside for small businesses. In that part of its work, the Los Angeles SBA office helped companies in its region secure contracts worth $200 million last year, Alvarado said.
But the agency is always looking for new ways to fulfill its mandate of providing more support for small businesses, he said.
One such recent initiative is a microlending program with the VEDC and L.A.’s First AME Church, which jointly dole out money in loans averaging $10,000 each, using a $750,000 SBA credit line for capital. The program produced about 35 loans in its first year, according to Alvarado.
In another initiative, the SBA recently began organizing bus tours to underserved areas to show bankers the business opportunities that exist there.
The agency has already done tours to South-Central Los Angeles, East Los Angeles, Huntington Park and South Gate. Alvarado said the SBA is planning a trip to the Valley, probably late this fall.
“We’re wanting to put something like that together, perhaps in the Pacoima area,” Alvarado said. “When we do these things, we typically take something like seven busloads of bankers out there. The bankers appreciate it because they get to see what’s really out there. They learn where there’s good business, and the banks go back there to transact business.”
