Budget Shortfall Threatens Aid for Small Businesses

A network of small-business development centers that supports start-up companies statewide is itself in danger of going out of business.

The centers, which provide tens of thousands of entrepreneurs with technical, financial and educational assistance, face a funding loss at a time when 1 million small businesses statewide employ 8 million workers, small-business advocates said.

Gov. Gray Davis’ proposed budget for the fiscal year 2003-04 eliminates $4 million in state funds for 38 small-business development centers in California. Without the allocations, the state would become ineligible for $15 million in federal Small Business Administration funds, advocates said.

“Although I am sympathetic to the need to reduce state expenditures in order to meet the current fiscal crisis, I believe this specific cut is a reversal of [the governor’s] support for the growth and retention of small businesses in California as well as the creation and retention of jobs,” said Roberto Barragan, president of the Valley Economic Development Center. The Van Nuys-based nonprofit agency has provided assistance to 30,000 San Fernando Valley small businesses since 1977.

Officials from the Valley agency are mounting a statewide campaign among small-business development centers to press Davis and lawmakers to keep the funds flowing.

Failure to fund the centers would hamper California’s efforts to expand the economy and create jobs, Barragan said, adding that businesses operating in low-income neighborhoods and those run by women and minorities would be among the hardest hit.

Small-business development centers provide free, one-on-one professional consulting, loan counseling, and classes and workshops on practices ranging from preparing a business plan to inventory management, Barragan said.

“Without this valuable program,” he said, “the established economic growth and the creation and retention of jobs in our service communities will be greatly jeopardized.”

Debbie Cohen, owner of Baskitz, a Woodland Hills gift basket service she opened in May 2001, said she owes her success to the Valley development center. Struggling financially and without a clear plan to expand her company, she sought help at the center two years ago.

With the assistance of the center’s marketing consultant, Peter Kraus, Cohen’s business grossed $90,000 last year, up from $10,000 in her first seven months.

Kraus advised Cohen to come up with a slogan for the business -- “Think outside the gift box” -- and practice presenting her baskets to prospective clients. She also benefited from swapping ideas with other entrepreneurs.

Cohen said closing the development centers is counterintuitive to the notion of free enterprise. “Isn’t the whole idea for us to be successful, create jobs, hire people and get people working?” she asked.