Government assistance to entrepreneurships: on local, state/provincial, and federal levels.

Author:Goldberg, Gilbert B.
Position:Canada-United States Law Institute Annual Conference on Comparative Legal Aspects of Entrepreneurship in Canada and the United States


Ron A. Straatsma

MR. STRAATSMA: Well, good afternoon, everyone. My name is Ron Straatsma, and I will be your moderator for Session 5.

I am the Managing Director of the State of Ohio's Canadian Office based in Toronto, and for your information, you may note that the State of Ohio operates eleven international offices with Canada, being officially opened way back in 1990 at the advent of the original Canada-U.S. Trade Agreement. This afternoon we are featuring our panel on government assistance to entrepreneurships, talking about government supported-various levels of support from government, and today we have two speakers to help us go through that process.

The first speaker is Mr. Gilbert Goldberg, who is the director of the U.S. Small Business Administration, Cleveland District Office, locally based. As the District Director, Gilbert is responsible for the administration of a business portfolio of some 6,400 loans with a total book value of some $604 million.

He has oversight of the Ohio Small Business Development Center and seventeen sub-centers and the coordination of five chapters of SCORE, which is a volunteer organization that provides free business counseling. Gil also serves as national SBA representative under the agency's lender liaison program for Key Bank and National City Bank.

And since his appointment as District Director in 1994, the office has focused its attention on putting the customer first and reducing red tape. In terms of the results of that, the bottom line focus on the customer has enabled Gil's office to outpace the nation in loan growth, and it did so over the last five years.

The District in 1999 also developed a campaign that enabled it to achieve record loan growth for minority-owned entrepreneurs, and in 2000 the Cleveland District Office developed a unique initiative for the economic revitalization for the City of Youngstown and did so by combining SBA resources, Project Sector Banking in the City of Youngstown.

Before coming to the SBA as District Director back in 1994, Mr. Goldberg spent 20 years in commercial banking of which the last ten were devoted to mid-market and entrepreneurial business development in Northern Ohio. He holds a Bachelor's Degree in Foreign Service from Georgetown University and Master's Degree in Business Administration from the University of Notre Dame, and he resides in Shaker Heights. So, Gil?


Gilbert B. Goldberg *

MR. GOLDBERG: Thank you, Ron, for the introduction. I don't have a Power Point presentation today. I will just come up here and talk a little bit if you don't mind. If you are wondering why I don't have a Power Point presentation, I don't believe in Power Point presentations. I was supposed to go second, and the other panel member came up to me and said "Gil, would you mind if you go first? We can't find my Power Point." Now you know why I don't believe in Power Point presentations.

I will try to make this as interactive and dynamic as possible, even though we don't have a Power Point.

One of the things I was wondering is why Henry King called me and said "Gil, can you be on this panel for the Canada-United States Law Institute?" And I thought maybe he was interested in my son who is an attorney in New York rather than myself, and then I started to look through the sessions for today, and I saw "Session 1: The Importance of Entrepreneurship to Economic Growth," "Session 2: Creating Entrepreneurships," "Session 4: Financing Entrepreneurships" and so on. All the sessions had the word "entrepreneurship" in it, and I thought to myself that's why we are here. You can't think of entrepreneurship in the United States without thinking of the United States Small Business Administration and our programs.

Basically, we have four programs that entrepreneurs can use, and you in the room can also take advantage of, whether you are an entrepreneur, a lawyer, an accountant or advisor. I think our programs are something that can bring value to a small business. I will give you a quick little overview first.

Our first program, the program most people think about, is our loan program. We have two loan programs, 7(a) an 504 that provides funding to businesses. (1) On the panel before I came up to the podium to speak,, I heard somebody say it is really hard to get financing because a lot of these startups lack hard assets.

Well, if you look at our programs, hard assets are not a requirement. Cash flow is a requirement. We think that Uncle Sam's guarantee substitutes for the lack of hard asset--or even the soft asset. We look for cash flow, and if the cash flow is there and the asset is not, theoretically, you can get funding under our program to start your business.

There is another program we have to help businesses once they get in business: government contracting--contracting for small business. (2) We facilitate small business access to government procurement officers in every department and agency of the United States Government. (3)

And right now, the segment of government procurement that is devoted for small business by law or presidential proclamation is $300 billion annually. (4) That' s a lot of money. And we will help you get the right contacts.

The third program we have is technical assistance. (5) That's providing business plan assistance, marketing assistance, and problem solving assistance to any business that needs it. It is done gratis. (6) It is done through our Small Business Development Centers around the state and also around the nation. It is also done through the Service Core of Retired Executives--which again is available to the entrepreneur free, individuals that actually have business experience in any given area.

And then our fourth area--which lot of VCs that are very familiar with permitting the SBA to fund Small Business Investment Company. We fund venture funds that specifically invest in small business. (7) Basically they make the decision on our behalf. They basically make the investment in the small business, and we take the risk with them.

Sometimes we win, and sometimes we lose on situations like that. But fight now I would like to get back to one of our programs, and that's our lending program. Nationwide this year--we are about half way through our fiscal year (our fiscal year began October 1, so we are just a little over half way through our fiscal year)--if you analyze the data, the loan data, we will probably make over 110,000 loans nationwide (8) (or guarantee because we don't actually make them--the banks make them, and we guarantee them).

So, there are 110,000 nationwide loans this year and there will probably be about $15 billion. (9) That's a lot of money to fund small business. Typically, about 20 to 25 percent of those 110,000 loans go to startups. (10)

These startups can be businesses that have just started in business or have been in business for two years because our definition right now is that any business that is two years or less we consider a startup or new business. So in that 25 percent of startup loans could be someone that has been in business six months or up to two years. That definition was changed probably about ten years ago.

Before that, before--let's say 1997--we defined startups as true startups, someone who had never been in business before. And I have a question for everyone here in the group. Going back, if you look at the true startup, someone who has never been in business before, not someone who has been in business six months or two years, what do you think their success rate is? You people out there that work with startup companies, put money into startup businesses, new businesses, what do you think their success rate is?

MR. ABRAHAMS: One percent.

MR. GOLDBERG: One percent. Okay. Anyone else? I like to throw out that question to groups such as yours.. I throw it out sometimes at a meeting with a group of accountants, and I would think the accountants are sharp once they get out their fine point pencil and know what they are doing. They usually respond 20 percent, 35 percent, five percent, or two percent.

Well, in the Cleveland District, which is really a small district--we run from the Pennsylvania line to the Indiana line and cover the northern 28 counties of Ohio (11)--back in 1994, we made 364 startup loans. (12) We tracked those startup loans, true starts, for a period of about six and-a-half years. We found after six and-a-half years that 78 percent were still in business. (13) That's a remarkable figure. It is even more remarkable when you think it is here in the rust belt--Northern Ohio. We started to ask questions: why...

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