American Banker Magazine's recent article on the Small Business Administration's outgoing chief, Karen Mills, was quite a love-fest. Here's the other side of the story that would be good for the public to hear.
Mills came from McKinsey-style mergers and acquisitions, is an heir to a candy fortune, and has always been dedicated to big business. On the other side, the banks also have no interest in true small businesses and understandably have always pushed hard to have the SBA raise loan limits. Big business and big government have always had a cozy relationship. Mills, with her M&A background (not a venture capital background, as the article stated; she never funded any startups), is simpatico with giant banks, and showed that during her term. It's no wonder the banks liked her. She isn't a proponent of small businesses at all.
The result: The number of loans under $250,000 fell steadily during her four years, and in the last year the SBA made the fewest loans for $100,000 or less in its history. Under Mills' direction, the SBA left behind the 28 million businesses with 20 or fewer employees (98% of all businesses, and supposedly the focus of the Small Business Administration). Mills and the giant banks succeeded in creating an SBA that no longer serves true small businesses with fewer than 20 employees. Dave Rader at Wells Fargo, whom the article mentioned, might like that (I know he does, we've talked a few times), but it doesn't serve America's small business interests for the SBA to have moved to a focus on larger businesses. It is one of the reasons the recovery has been so tepid. The 28 million businesses that run the economy have had less access to money than in decades.
But Mills also took steps to destroy the SBA's small business emphasis on her own, without any help from the banks. She raised the size and revenue limits on virtually every category of business, in some cases by 300% (i.e. from $7 million to $21 million and up), thus allowing tens of thousands of more giant businesses to qualify for loan money that used to go to true small businesses.
Raising the loan limits and raising the size limits contributed to the article's inflated numbers on loans. Contrary to the reporting, making fewer loans to much bigger businesses isn't something for the SBA or Mills to blow their horns about. Ignoring the 28 million Smalls to make more loans to the Bigs is not the function of the SBA. But Mills, who has never focused on small businesses with fewer than 20 employees, or started one, would not understand this.
Next time you write an SBA article, think about those 28 million businesses that constitute 98% of all companies, and ask yourself if what you are describing helps them or hurts them. You would have written a radically different article with that in mind.
Chuck Blakeman is the founder of Crankset Group, a Denver firm that advises small business owners.