Brooklyn's Progress
June/July 2006

BY LETICIA THEODORE

Small Business Administration (SBA) boss Hector Barreto announced on Apr. 26 that he is stepping down from his post after a five year reign.

President George W. Bush almost instantaneously nominated Steven C. Preston to the post following the announcement. Mr. Preston is executive vice president of strategic services at Illinois-based ServiceMaster Co. which markets among other things housecleaning and termite and pest control. He must be confirmed by the Senate.

In 2001 President Bush nominated, and the Senate unanimously approved, Mr. Barreto for the post. His responsibilities included oversight of the delivery of financial and business development tools to small businesses nationwide; SBA is also the largest backer of direct and guaranteed business loans and disaster loans. 

Mr. Barreto’s tenure was marked by criticism for his agency’s handling of the Sept. 11, 2001 terrorist attacks and the 2005 Gulf Coast hurricanes, especially Hurricane Katrina.

Last year, when President Bush announced his plan to slash SBA’s budget from more than $3 billion to $636 million, in the 2006 budget, Mr. Barreto called the plan, “fiscally responsible, good for small businesses and good for America.”

But, Senator Olympia Snowe, Chairwoman, Senate Small Business Committee who is also a Republican, spoke up saying the cut would damage the agency’s ability to stimulate the economy and generate jobs.

“Brooklyn small businesses did not fair well under the Administrator’s tenure – in fact, they received smaller loans, less contracting opportunities and the entrepreneurial development centers they rely on fell victim to funding cuts,” said Congresswoman Nydiá Velazquez, ranking Democrat on the House Small Business Committee, who represents the 12th Congressional district including parts of Brooklyn.

“My hope is that the incoming head of SBA will be more focused and engaged in helping small businesses access all of the tools they need in order to be a successful business owner – and truly being an advocate on behalf of their needs.”

Despite a loan portfolio worth more than $45 billion – the agency uses loan amounts to measure success – the SBA was beset with problems. According to the American Small Business League, ten Federal investigations and two private studies uncovered fraud, abuse and lack of oversight at nearly all of the agency’s chief programs. Further, under Mr. Barreto, the agency’s budget was slashed by almost 40% in five years. A government-wide survey indicates morale among SBA employees is the lowest of all federal agencies.

Despite these criticisms, Mr. Barreto’s supporters credit him with bringing stability to the SBA’s leading loan program, the 7 (a) program, named for the section of the Small Business Act that authorizes the agency to provide loans to small businesses. The 7(a) program is the most basic and widely used of the agency’s financing programs and under Mr. Barreto’s direction, Congress and lenders agreed to fund 7(a) loans by lender and borrower fees rather than congressional allocations. The change virtually ended the annual fighting during budget time, though it also meant higher priced borrowing for small businesses. Mr. Barreto also developed SBA Express, which provides smaller loans with less paperwork, and centralized the loan processing system, which significantly cut wait time for approvals.

Mr. Barreto will head, the Latino Coalition, a small Washington, D.C.-based advocacy organization. He will stay on at SBA until the new Administrator is confirmed.