February 2005

ABCs of Accounting: Women's Support For Federal Small Business

As women owners of small businesses, we face many challenges. Statistics show that we begin our businesses with smaller amounts of personal savings than our male counterparts. This makes any help we can receive critical to our long-term success. One source for this help can be the federal government.

The first line of assistance for a small business is the Small Business Administration. This government agency’s duty is to assist the small businesses in our country. Our small businesses create a majority of new jobs that become available and are the growth engine of our economy.

The Small Business Administration (SBA) does this in several ways. The most important for most business owners is that the SBA will guarantee a portion of the loans that are made by banks to our business. This makes the risk of our loan lower to the bank and therefore lending to us more attractive. However, getting the SBA’s support of our loan application is not a cakewalk. On the SBA’s website (www.sba.gov) are numerous forms which will need to be completed. One thing that these forms require us to do is to truly analyze where our business stands and how we intend to make it grow in the future. Since most of us are so busy just getting from one moment to the next, analysis and planning for the future often gets pushed aside. To apply for an SBA loan we must address these issues. The result is that even if the loan is not approved, we may have a clearer vision of where our company stands and where it is going.

The next concern of the SBA and the bank is credit worthiness. The basic question is “Can we repay the loan and the interest due when we say we will?” This is crucial to the loan approval process because the bank is in business just like us and cannot make money if the amounts owed to it are defaulted. This is where our personal credit history may become very important. If our business is still relatively new or relatively small, it can be difficult for the SBA to determine if our business can pay its debts. So they look to us. If we have a history of bankruptcies or defalcations on borrowed sums, there is generally no reason to think that the future will prove us to be better money managers than we have been in the past. So if our credit history needs some polishing, do it now. We need to make our payments on time. We should review our credit history and correct any errors. This may make getting an SBA loan more likely when our big new customer places an order and we need cash to fulfill the contract.

The next thing that the SBA does is offer business advice. There are local or regional offices where you can meet with small business advisors. This can help you in finding lenders, completing your forms, gaining general business information or assisting with the final thing that the SBA provides.

The last SBA program that I want to mention is the Women-Owned Small Business (WOSB) procurement program. Many people confuse this with the former Section 8 contract bidding. Section 8 has been a commonly used term for a minority owned business (this included women owned businesses) that contracted with the government on terms that advantaged the minority vendor. In years past, this advantage meant that minority bids for certain government contracts could be a certain percentage higher than bids received from regular vendors and they were viewed as competitive.

In recent times, this bid discount has been replaced by a government program that encourages participation of women owned business in the procurement process for each government department. There is no requirement that these departments allocate a specified portion of their money to contracts with women owned businesses, but that is part of the evaluation process conducted by the General Services Administration. The government wide goal is participation by business concerns owned and controlled by women at not less than 5% of the total value of all major contracts and subcontract awards each year. This is called the Women-Owned Small Business (WOSB) Procurement Program. There is great information on the Small Business Administration website by clicking on “women in business”. The SBA’s goal is to help us through the labyrinth of government agencies to find where we can become a part of the procurement process. Please understand that this is a participation advantage rather than the old system that was a bid discount advantage. This change also means that being qualified to submit a bid is now fairly simple and in many cases we can self-certify. This certification process is explained on the website referred to above.

In addition to federal government programs, resources may be available through local initiatives or private foundation grants. If our specific community has needs that a private foundation is helping with, such as redeveloping a low income area or developing minority owned businesses, the best place to look for that information would be with the local city hall or chamber of commerce. They would be most aware of any initiatives of this kind for which we might qualify.

Growing our business is as great a challenge as starting it was. We need support from a variety of sources. Fortunately, the federal government small business programs may be just the source we need.