SBA Nominee Has High Hopes, Uncertain Budget
When Hector V. Barreto Jr.--son of an immigrant entrepreneur--launched his own business in East Los Angeles in 1986, his goal was to tap into an underserved market by offering insurance and financial services to the region’s rapidly expanding Latino community.
By appealing to this neglected niche while forming strategic alliances with key players in the broader business world, Barreto was able to boost revenues in his businesses from about $65,000 in the first year to about $3 million in 2000, according to Barreto and several associates.
In much the same way, Barreto--whose nomination to head the U.S. Small Business Administration is due for a vote today in the Senate--looks out at the estimated 25 million small businesses in the nation and sees needs unmet.
Critics say that the agency, created in 1953 to “aid, counsel, assist and protect . . . the interests of small business concerns,” helps only about 1% of its target market each year, or about 250,000 businesses.
Barreto says it’s more like 1 million businesses and describes the total over the agency’s nearly 50-year history as “millions and millions of businesses that have contributed billions to the federal government in the form of taxes.”
Still, some small-business advocacy groups contend--and Barreto concedes--that for millions more small firms, the SBA is nowhere to be seen.
And Barreto, who was described by friends as being “passionate” about small business, aims to do something about that.
“There are a lot of businesses that have never heard of the SBA or they don’t know how it works or they may have heard of a negative experience from someone,” said Barreto, whose nomination was approved last week in an uncontested 19-0 vote by the Senate Committee on Small Business and Entrepreneurship, clearing the way for confirmation by the full Senate.
“So there’s a lot of opportunity to change the image of our program and change the way we distribute our services. We’re going to be doing a lot of outreach.”
Adding more businesses to the SBA client roster may be difficult, given the drastic budget cuts proposed by the Bush administration--cuts that have rankled even members of the president’s party.
Four Republican members of the Senate small-business committee decried the “dramatic reductions in the funding for the SBA” in a July 13 letter to the subcommittee that ultimately approves the agency’s budget. Similar concerns were expressed by Democrats in the House and Senate.
For the 2001 fiscal year, the SBA, which has a permanent full-time staff of about 3,000, had an appropriation of $857.6 million. Under the Bush budget, funding would have been cut to $546 million.
In response to the bipartisan outcry, the figure was boosted last week to $773.5 million, and the full Senate is expected to address the matter before its August recess.
Barreto, whose annual salary would be $133,700, called the give-and-take in the budget process “healthy,” adding that in the end, “I believe that we are going to be able to have a very vital agency. We are going to be very effective in our programs.”
But even before Barreto, a 40-year-old native of Kansas City, Mo., was nominated to head the agency, questions were being raised in both houses of Congress about the effectiveness of the SBA.
Sen. Christopher S. “Kit” Bond (R-Mo.) and Rep. Donald A. Manzullo (R-Ill.) asked the General Accounting Office in January for a thorough review of the mission and functions of the agency, stating in a letter that “the present organizational structure of SBA appears haphazard, having been devised without a long-term plan in mind.”
Barreto said he was not familiar with the GAO report, which is expected to be completed in early fall. But he said one of the first things he plans to do if confirmed by the Senate is to “have a top-down review of the agency and get a handle on the programs that are working well.”
And from those that aren’t, he’ll demand an accounting.
Barreto said he sees untapped potential in the agency’s venture capital program, in which SBA-guaranteed funds supplement money from private venture capital firms to create privately owned and managed investment firms.
In many ways, the changing image of small-business America can be seen in Barreto, a Midwestern transplant who ripened his entrepreneurial skills in California’s hothouse economy.
Born to an entrepreneurial family, Barreto spent part of his childhood helping out at the Kansas City restaurant operated by his parents, Hector and Mary Barreto. In 1979, the elder Barreto, a native of Mexico, helped launch the U.S. Hispanic Chamber of Commerce. Hector Jr. serves as vice chairman but plans to resign to take the SBA post.
“He’s picked up where his father left off,” said Ruth Lopez-Williams, who succeeded the younger Barreto as chairwoman of the Los Angeles-based Latin Business Assn., one of the largest Latin business support groups in the nation.
“He has a knack for these kinds of things,” Lopez-Williams said, speaking of Barreto’s qualifications for the SBA post. “He’s very engaged in small business. He loves it and he’s good at it. He’s lived it.”
The untapped markets that attracted Barreto, who operates his financial services business with his wife, Robin, have led growing numbers of minorities, especially women of color, to try starting their own businesses. Barreto says he wants to make certain that the SBA is in tune with that growth. He has worked closely with groups that represent entrepreneurs of all races, another experience that will serve him well in the SBA post, said Elizabeth Lisboa-Farrow, chairwoman of the U.S. Hispanic Chamber.
Barreto parlayed his Republican Party contacts into the co-chairmanship of Bush’s California presidential campaign and ultimately the SBA nomination. So when those familiar with Barreto assessed his qualifications to head the agency, the refrain used most often was “He’s a natural.”
“He’s clearly an icon for a lot of small-business owners,” said Lopez-Williams. “He can relate to them, and they can relate to him. And that’s really a plus.”
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Karen Robinson-Jacobs covers minority and immigrant-owned businesses for The Times. She can be reached at karen.robinson@latimes.com.
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Small Business Administration
Genesis: Congress created the Small Business Administration through the Small Business Act of July 30, 1953. Its function is to “aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.” The charter also stipulates that the SBA will ensure small businesses a “fair proportion” of government contracts and sales of surplus property.
Staffing (as of May 31): 4,146 employees, including disaster relief workers
Programs include: Flagship 7(a) guaranteed business loans, which aid about 40,000 businesses per year; SCORE (Service Corps of Retired Executives), which includes more than 11,400 volunteers; Small Business Development Centers, which serve nearly 600,000 annually
Budget, fiscal year 2001: $857.6 million
Sources: Small Business Administration, Senate Committee on Small Business
