- The Washington Times - Monday, December 25, 2000

Small businesses in metropolitan Washington that in recent years have shunned government contracts and loan programs can be expected to return to them as the nation’s economy cools, administrators and company officials say.

In fact, small businesses across the country that have been reluctant to use federal loans from the Small Business Administration are looking in that direction as banks become increasingly reluctant to lend to new and developing entrepreneurs.

“If you get a government contract, it’s nice, steady business,” says Sounia Nejad Cheney, president and chief operating officer of ChainLink Networking Solutions Inc.

Her company, which provides information technology, has never used any government programs or loans. Ms. Cheney says she has been overwhelmed by the thought of working with the government through an arduous process with tons of paperwork. It seemed easier to attract private-sector customers on her own.

Now, in order for her company to grow and sustain it, she says she may have to rely on those government contracts she felt unnecessary before.

“I’m hoping things will get better,” Ms. Cheney says. “I have people knocking on my door to join our company, but I need a long-term project to be able to do that.”

She cannot, however, rely on banks to help her grow in the near term, says Martin Regalia, chief economist for the U.S. Chamber of Commerce.

And small businesses, generally risky investments for banks, are going to feel the brunt of a more selective lending process as banks kick into a more conservative mode, he says.

“The banks are going to be in a retrenchment mode,” Mr. Regalia says. “The operational mode of the SBA is somewhat different than a market entity.”

The Small Business Administration is often an untapped resource for area small businesses.

The SBA, which also helps entrepreneurs create and revise their business plans and balance sheets, and prepares them for getting and repaying a business loan, has money left over.

“What I’m seeing is a lot of the folks that need the help do not know how to access the services,” says Calvin Jenkins, district director for the Washington District office of the SBA.

“They don’t use it to the extent that we would like,” he says. “So we would like to make more loans.”

In 1999, SBA offices nationwide loaned businesses $16 billion. Mr. Jenkins says loans usually total in the $14 billion to $16 billion range.

For Metropolitan Washington businesses, SBA guaranteed 455 loans totaling $131.3 million.

Loans for women-owned business have actually declined over the past three years. In 1998, the SBA guaranteed 126 loans to women-owned businesses. In 1999, it dropped to 115. For 2000, so far, the number dropped again, to 94. The goal for the SBA was 176 for the past year.

“If you’re a small business and you’re looking for credit, the credit options are less than what they were a year or two ago because people are becoming risk-averse,” Mr. Regalia says. “In those instances some of the SBA programs are designed to provide credit, and people sometimes don’t take advantage of that credit.”

As for contracts through the SBA, businesses have been equally uninterested.

For government contracts worth at least $500,000, businesses are required to put in a subcontracting plan.

In 1999, the federal government spent $189 billion in contracts, while small businesses received about 22.6 percent.

“It’s a tremendous market for small business,” Mr. Jenkins says.

“When the federal government buys, they are buying everything from a pan to a warplane. A small business may not be able to produce the warplane, but they can produce the parts.” Small businesses should get 23 percent, the federal government’s goal, he says.

“Once we achieve 23 percent, I think there’s room to go further.”

Small businesses have historically looked to the private sector for loans. Mr. Jenkins says small businesses need to apply for more government loans because the fiscal 2000 figures should mirror those of 1999.

“Funding and resources to help them to start and grow and expand their businesses are out there,” Mr. Jenkins says.

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