Steven Preston became the administrator of the U.S. Small Business Administration in July, replacing Hector Barreto, who resigned to become national chairman of The Latino Coalition. Preston left a successful career as executive vice president of Downers Grove, Ill.-based The ServiceMaster Co. and moved his family to Washington, D.C., to lead the SBA.
Despite significant SBA budget cuts by the Bush administration, Preston says the president is committed to utilizing the agency as a key component to make sure the nation’s economy remains strong. The SBA backed a record number of loans, more than 100,000 totaling $19.1 billion, during the last fiscal year.
Preston recently visited Milwaukee to announce funding for the Women’s Business Center in Milwaukee and to help launch the Urban Entrepreneur Partnership (UEP) center in Milwaukee. During his visit, Preston spoke with Small Business Times managing editor Andrew Weiland. The following are excerpts from that interview.
SBT: You are still fairly new to this job. How is it going?
Preston: “It’s going well. There is a lot of opportunity for us to make a big difference. We have been going around the country, talking with legislators, with trade associations and, most importantly, with our employees and our customers to find out how we can be more effective in meeting the needs of American small businesses. It has been a terrifically rich experience for me to get out and listen and think about how to apply what we’ve learned to what we’re doing going forward.
“A lot of times, we try to come forward with a big new law, or policy or regulation to address an issue. But I think we can get a lot done by just operating the agency more affectively with some sound business principles and also using those same principles to engage with other partners outside the SBA.
“We’re getting out there. We’re listening hard and focusing very hard on what our customers are telling us, in terms of what they need. And, we’re focusing very hard on what our employees are telling us, not only because they are telling us what the customer needs, but they are telling us we need these tools, or technology or training opportunities to serve customers more effectively.”
SBT: Tell me a little about the announcements you are making here in Milwaukee to create more opportunities for business ownership for women and minorities.
Preston: “We have something called Women’s Business Centers. There are almost 100 of them that are in place or have been approved. Those are local centers that focus primarily on working with women, generally women in what I would call underserved communities, who want to look at owning a business as a way to economic livelihood. A lot of them are single moms. A lot of them are welfare moms. And these women are starting and growing small businesses as a way, not only to feed their families, but to realize their own dreams. So these are terrific centers that provide great training to help women understand how to get access to capital. Over time, when the businesses are large enough to do so, (the centers) help these women-owned small businesses work through the process to sell their goods to the federal government sometimes, so they can grow their business that way. So those are primarily training assistance development centers.
“Now the UEP is really a collaboration of a number of different groups, specially focused on helping minority entrepreneurs start businesses and grow businesses. We are partnered with the UEP because we have a district office here that can help them in any number of ways figuring out how to make the right linkages in the community. We also have a lot of resources we bring to bear. We guarantee bank loans (to small businesses). And to the extent that lenders are not reaching the city the way we would like them to, we can work with them to help them make those linkages as well. Capital is very important for small and growing businesses. So, we provide access to capital through our bank partnerships. We provide access to any number of resources that provide training and development and technical counseling for small businesses. We’re going to be both a support structure and a constellation of services that the UEP can tap into for the benefit of the entrepreneurs here in Milwaukee.”
SBT: I want to ask you some questions about the SBA as a whole. There have been some complaints that some of the federal government contracts that were supposed to go to small businesses were supposedly, according to the critics, going to large businesses. Is that an issue? Is it being addressed?
Preston: “Let me explain to you how this works, because it’s very important that people understand this. If a small business gets a contract with the federal government, that contract is considered a small business contract for its duration. So, if that small business grows to become a big business during the length of that contract, it is still (considered) a small business contract for accounting purposes, under the law. If that small business is acquired by a big business, for the duration of that contract the federal government still counts that as a small business contract.
“So when you hear those claims, many of those are entirely compliant contracts under the current regulations. Now, I will tell you that there are millions of contracting events in any given year, and sometimes there is mis-coding. If there is fraud, it’s totally unacceptable, we need to be getting after that, but as we’ve dug into it, we don’t think that’s really what’s driving this issue.
“Now, we’re doing two things that are very important. We are working hard to tighten up the standards for what qualifies as a small business contract. The other thing that we are doing is we are working with other federal agencies to make sure that they do everything in their power so when they publish small business data there are no inaccuracies in it. We’re working to make sure that when data gets out there, it is as clean as possible. As the federal government, it is our obligation to be transparent and to be trustworthy, and even though there are important explanations for these issues, we need to get ahead of them. We can’t have information getting out that confuses people, because it’s our job not to do that.”
SBT: The SBA budget has been cut significantly under the Bush administration. But at the same time, the loans backed by the SBA are at an all-time high. Still, some critics have said the administration is dismantling the agency. From your perspective, does the administration consider the SBA an important priority?
Preston: “I wouldn’t be sitting here if they were trying to dismantle it. Frankly, I moved my wife and five children across the country and left a very, very rewarding private sector career because I believe in what the SBA does and really wanted to make my own impact on it. So, if I had gotten any sense that was happening I wouldn’t be sitting here.
“We obviously have the tools we need to continue the growth of this organization. I think the volume numbers (of loans) speak for themselves. There is a lot underneath those budget numbers. The federal government used to subsidize the loans we have out there, heavily. We don’t subsidize the loan costs anymore. The federal government pays for our administrative costs, but we effectively break even on the loans that we guarantee. So, the taxpayer doesn’t pay for those anymore.
“We are trying to get more efficient in how we do things. We have begun to centralize a lot more activities to make them, just like a business does, so we are more efficient, we are delivering those services with fewer taxpayer dollars. So there has been a lot of belt tightening. Frankly, I think with a lot of federal agencies, there has been belt tightening. But we continue to grow the reach and impact of the agency with the budget dollars we have.”
SBT: What do you think are the biggest issues for small business in this country today?
Preston: “Well, there are a lot of them. Health care costs. There is very important legislation called Small Business Health Plans that has not gotten through the Senate yet. All it does is allow small business associations to bring a lot of small businesses together to buy health care so they can leverage their buying power. It doesn’t cost the taxpayer a penny. We think it will save (businesses) 10 to 17 percent (on their health insurance costs). So, health care is huge.
“Death taxes are huge. The current legislation is due to elapse in a few years. What will happen is small businesses will have to pay an enormous tax when the owners die and try to pass it on to their children. The children will have that business with a huge load of debt inflicted on them by the federal government. It’s unacceptable. So, we’ve got to get that repealed permanently.
“Regulation is a challenge. Big businesses have entire departments to deal with regulatory compliance. Small businesses, they’re marketing part of the day, they’re doing financial statements part of the day, they’re filling out their regulatory stuff part of the day. It really hits them hard. So we’ve really got to make sure that the regulatory environment is such that we are not burying small businesses with that.
“And then access to capital, especially for smaller businesses in the earlier stage. We really need to make sure that they have access to capital to grow. And that’s a lot of what we do at the SBA.”
Steven Preston
Title: Administrator, U.S. Small Business Administration
Education: Bachelor’s degree in political science from Northwestern University; MBA from the University of Chicago.
Past professional experience: Senior vice president and treasurer of Greenwood Village, Colo.-based First Data Corp.; investment banker at New York-based Lehman Brothers Inc., executive vice president of Downers Grove, Ill.-based The ServiceMaster Co.
Family: Preston and his wife, Molly, have five children.
