SBA and Agriculture Need Better Collaboration

The heads of the Small Business Administration and the Department of Agriculture should formalize a better process for collaboration on programs fostering economic development in rural areas by promoting entrepreneurship and community development, advises a new report.

The governmental watchdog group the General Accountability Office analyzed (pdf) how some SBA and Rural Development programs work together and with other agencies. More than 80 programs overall, administered by different federal agencies -- not just SBA and Agriculture -- target rural economic development.

Both the SBA and Rural Development offer business loans and grant programs for rural development and play key roles in spurring economic growth in rural areas. They also have a joint agreement under the Rural Business Investment Program to create investment companies that would provide equity for rural small businesses.

The GAO in its Sept. 18 report found that the SBA/Rural Development collaboration "has been sporadic and mostly self-initiated by officials in field offices." The report also found that the use of formal agreements between the agency and Rural Development varied by location. About half of SBA and Rural Development field offices "did not appear to be collaborating at all or to have an established framework to facilitate collaboration."

The lack of formal incentives to encourage collaboration has created an atmosphere where the agencies are "unable to share information on the benefits of working together and encourage additional efforts to do so in the future. Without a formal approach to encourage further collaboration, the likelihood that the agencies will be able to fully leverage each other's unique strengths to help improve small business opportunities and promote economic development in rural communities is reduced," found the report.

While it appears that the two camps have overlapping programs doing very similar things, representatives from the groups who were interviewed by the GAO said there are clear differences.

SBA and Rural Development officials said there was little duplication between the two agencies' loan and business programs. For example, the maximum loan amount for SBA's 7(a) loan is $2 million, compared with a maximum loan amount of $25 million for Rural Development's Business and Industry loan. Additionally, the SBA processes loans much faster and deals solely with for-profit firms or entrepreneurs.

The report suggests that SBA and Agriculture should start taking steps to improve these processes now. Recent legislation such as the so-called "Farm Bill" that was signed into law in June requires the Agriculture secretary to establish a new Rural Collaborative Investment Program to support regional investment strategies for achieving rural competitiveness, including the better use of other federal, state and local governmental resources.

The House Small Business Subcommittee on Rural and Urban Entrepreneurship held a Nov. 14, 2007 hearing on inter-agency collaboration and on the ability of SBA and Rural Development to work together to better serve small businesses in rural areas. The GAO testified at that hearing. This recent report came from a request for the GAO to review the agencies' programs to determine whether coordination could be improved.

By Sharon McLoone |  September 29, 2008; 8:00 AM ET Watchdogs
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