Economics

The Not-So-Small Business Administration

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New York Times business writer Robb Mandelbaum recently highlighted a new rule from the federal Small Business Administration expanding the definition of "small business" to include some 18,000 businesses "that until now have been unable to take a government-backed loan or to get assistance winning federal contracts." In other words, some not-so-small businesses have successfully persuaded the feds to change the rules on their behalf. It's not exactly a shocking story and Mandelbaum reports it in a fairly straightforward manner. At least until he drops this little nugget:

Political pressures inexorably push up small-business size definitions. That, at least, is the theory of Jonathan Bean, author of a history of the S.B.A. provocatively titled "Big Government and Affirmative Action." As the name suggests, this is not exactly a work of scholarship; it's a polemic offered by an ideologue staunchly opposed to any S.B.A.-style intervention in supposedly free markets. Nonetheless, the events of the last several weeks suggest Mr. Bean has a point.

Can't you just feel Mandelbaum's pain as he typed that unforgiving last sentence: "Nonetheless…Mr. Bean has a point." And indeed, Professor Bean does have a point, as any reader of his scholarly work would already know. Political pressures do in fact "inexorably push up small-business size definitions." As for Mandelbaum's breezy dismissal of Bean's book, The Journal of American History praised Bean's "careful analysis, his all-encompassing bibliography, and his inclusive endnotes," which together made Big Government and Affirmative Action "the definitive monograph." That's high praise from a serious academic journal, which hardly corresponds to Mandelbaum's erroneous labeling of it as a "polemic." Though perhaps Mandlebaum just scanned the title and promotional copy on Amazon in order to make a cheap point. Whatever the cause, it's sloppy journalism.

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  1. I want Mandelbaum to address the hiring of illegal Cuban crepe rollers by his father Izzy at The Magic Pan.

    Only then can I take him seriously.

    1. Sorry, they were Dominicans being passed off as Cubans.

      1. Nobody? Wow, I guess I’m the only Seinfeld or Lloyd Bridges fan left here.

  2. I was watching some idiot on the teevee not long ago, and he was whining about the “anti-business” slant of the current administration.

    His evidence? It’s too hard to get a SBA loan. “This damned all-encompassing government isn’t all-encompassing enough!”

    What a dope; you couldn’t get me to apply for SBA assistance at gunpoint.

  3. Political pressures inexorably push up small-business size definitions. That, at least, is the theory of Jonathan Bean

    How do you simultaneously type and stick your fingers in your ears while yelling, “Lalalalalalalalala!” at peak volume, Mandelbaum? That’s quite a trick.

  4. Jonathan Bean, author of a history of the S.B.A. provocatively titled “Big Government and Affirmative Action.” As the name suggests, this is not exactly a work of scholarship; it’s a polemic offered by an ideologue staunchly opposed to any S.B.A.-style intervention in supposedly free markets.

    As the paragraph suggests, the reviewer hardly read the book and is instead reviewing the title.

    Whatever the cause, it’s sloppy journalism.

    The cause is that he IS a sloppy journalist.

  5. I can’t help but wonder how much of it is big business wanting to get cheap government money (though it seems that a bank loan is plenty cheap these days), and how much is the SBA and the administration changing the rules so that SOMEBODY will qualify for a loan, and the SBA can justify its existence.

  6. SBA is worthless. No bank wants to have anything to do with any SBA loans. They will only take them when forced. The SBA routinely delays payments for years. It is very bad business to get involved with the SBA

    1. This is BS / you don’t know what you’re talking about.

  7. The title of this post should have been “Mr. Bean Has a Point”.

  8. All said: The SBA Lending program and SBIC subs have been a pretty successful government program.

    Only two turns of leverage are guaranteed by the SBA to SBIC subsidiaries. So the originator (and it’s all self originating) has equity 33% up the capital stack, which is a lot of ‘skin in the game’.

    I’m sure there have been some shoddy under-writers (Allied comes to mind), but all said the SBA/SBIC Lending program has made the gov’t money and provided liquidity (I’m not sure what else the SBA does other than this program). Considering the benefits big Co’s get at the behest of government programs – until those kickbacks are eliminated – I won’t really complain about the SBA as somewhat of an equalizer.

    I haven’t read the sited book, anyone know if it’s good?

    Also, what is the new definition for “small business”? What EBITDA/revenue?

    1. Addendum: I don’t know much about the new “smaller concerns” SBA/SBIC program / have an opinion on its successes / failings.

      – meant to thread that, sorry for posting twice.

      1. EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization

  9. Addendum: I don’t know much about the new “smaller concerns” SBA/SBIC program / have an opinion on its successes / failings.

  10. (The definition of) EBITDA (if the fucking server squirrels will let me post this second attempt is) Earnings Before Interest, Taxes, Depreciation and Amortization

  11. How long ’til all SBA loans require the enterprise to accept a union contract?

  12. Mandlebaum, Mandlebaum, Mandlebaum!

  13. Bean hammers Mandelbaum in the comments. And here.

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