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Barreto: SBA Leader Says Economy Has Turned Corner

As the administrator of the U.S. Small Business Administration, Hector Barreto oversees financial and business development programs for the nation's entrepreneurs. The SBA has a portfolio of more than $45 billion of direct and guaranteed business loans and disaster loans. The SBA is the nation's largest financial backer of small businesses.

Barreto is an entrepreneur himself. He founded Barreto Insurance and Financial Services in California and later started another business as a securities broker/dealer specializing in retirement plans. Barreto, who was appointed to the top job at the SBA by President George Bush in 2001, was in Milwaukee recently to deliver the keynote address at the National Credit Union Administration's economic empowerment summit. During his visit, he spoke with Small Business Times managing editor Andrew Weiland. The following are excerpts from that interview.

SBT: What is the state of the SBA?

Barreto: We're on track to have the best year in our 51-year history. We'll do more loans this year than ever before. We'll reach more communities, especially the fastest-growing segments of small business, which are women-owned and minority-owned small business. We'll do more veterans loans, we'll do more rural loans. We are also going to train more people. "This year, we're on track to train over 2.1 million small business persons. We'll facilitate more contract opportunities for small businesses as well.

We have a number of different initiatives that match up small business with federal agencies and a lot of Fortune 500 companies.

We never used to do that before, and we set up about 20,000 of those appointments over the last two years. The federal government just reported our contracting numbers for the last year. We surpassed the year before by over $13 billion. We did $65.5 billion - 24 percent of all federal contracts went to small businesses."

SBT: How would you describe the state of the U.S. economy?

Barreto: Many small businesses are feeling much better than they were a year ago. They're starting to hire people again. Also, they are purchasing more. A couple years ago when we would visit those small businesses, they would say, 'I think the economy could turn around, but I'm not sure yet. I'm not going to buy that piece of equipment, I'm not going to buy that technology I need and I'm definitely not going to hire anybody.'

Well, over the last year, that's changed. Now a lot of these small businesses are saying, 'You know, once that jobs and growth package got passed in Congress and incentiveized us by lowering our top marginal tax rate and by quadrupling the business deduction, that was kind of the green light for us to go out and start doing those things that we hadn't been doing before. On top
of that, what we started noticing is our customers started coming back, which made us even more bullish.'

Now, having said that, small businesses still have challenges. They're concerned those tax rates are going to go back up. They tell us that the fastest-growing cost is health care and that they need some relief. They're seeing double-digit increases in their health insurance premiums, whether they use the plan or not. So, we talk to them about the things we're doing at the federal level, for example health savings accounts, which is a great tool for them to lower their premiums.

One of the other things small businesses are worried about is excessive regulation. The SBA has been able to document that we've saved small businesses over $6 billion in regulatory costs, and from the inception of the administration, over $30 billion. We need to do more of that. It's not to say that all regulation is bad, but when there is regulation that is redundant, excessive regulation that hasn't really been looked at for years, we can do a better job of at least streamlining those processes and eliminating redundancies.

Another area they are concerned about is excessive lawsuits. Many small businesses are worried they are one bad lawsuit away from going out of business. They're also interested in new opportunities, new markets. I referenced federal procurement, but also they are interested in international trade. And it's not surprising when you consider the fact that 97 percent of all companies in the United States that do exporting and importing are small businesses - over 225,000 companies. The challenge for those companies is they only represent 30 percent of all the trade that's going on, so there truly is an opportunity to grow that pie for them."


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