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SBA office faces demise in budget cuts

Whether it comes at the hands of Congress, President Bill Clinton or the agency’s own administrator, the demise of Rochester’s U.S. Small Business Administration branch office looms this year.
Administrator Philip Lader has said branch and post-of-duty offices will be sacrificed in a drive to slash the SBA budget. In addition to the Rochester branch, Lader’s plan to ax $284 million from the 1995-1996 budget also would eliminate SBA branch offices in Elmira, Melville and Albany.
District SBA offices in Buffalo and Syracuse also are in jeopardy.
Local SBA lenders and business owners who have obtained assistance through the Rochester office say its closing would be a severe blow.
Branch office closings are certain, said Michael Stamler, SBA spokesman in Washington, D.C., but no precise list of survivors among the district offices will be drawn up until the end of this month.
At least one district office will remain in each state, and larger states might have more than one. New York’s district offices are in New York City, Buffalo and Syracuse.
“Our fate is in the hands of Congress,” said Robert Novak, deputy director of the Buffalo district office. “SBA hopes to have a final plan in the next 30 days, but this will all take awhile to play itself out.”
SBA budget cuts are seen as a defensive move to salvage at least part of the agency, which faces an all-out Republican attack. In addition to the SBA’s own plan, both houses of Congress are expected to take shots at reworking the agency.
Over the past six months, Rochester’s SBA office approved 155 loans, sending $33 million to area small businesses. In the previous year, the local SBA office guaranteed $54 million in 226 small-business loans.
Fees collected on those 1994 loans amounted to more than the local office’s overhead.
As a full-service branch since 1990, Rochester has had authority to approve and fund loans locally, logging an average application turnaround time of four to seven days. It has been operating for some time at almost half-staff, down to six employees from the 10 it employed in 1990.
The SBA’s plan “does not mean a diminution of SBA services available,” Stamler said. Agency information is available by phone or online to modem-equipped computers, he noted, and a few hours of travel time to a district office “will not make a life-or-death difference to a business.”
Local commercial lenders who count on the Rochester branch to funnel loan candidates and SBA backing take a different view. They say loss of the office here could impact area economic development drastically.
“As a group, commercial lenders are very concerned about the loss of the tremendous resource in that local office in terms of community knowledge and professional expertise,” said Norine Jones, assistant vice president and community relations officer for Citibank (New York State).
Local-office effectiveness in preparing loan candidates is critical to “creating an appetite for the SBA business” at banks, Jones said, adding that paperwork has dropped and loan volume has risen over the past several years in dealings between the Rochester SBA and Citibank.
Buffalo’s Novak said branch SBA offices can lock into the local business community in a way district offices cannot.
“Buffalo and Rochester are strikingly different marketing areas, very different places to do business,” he said.
Twenty-two of the companies ranked in the 1994 Rochester Top 100 list of the area’s fastest-growing private companies have been SBA loan recipients. Past clients of the Rochester SBA office slammed the decision to close the Rochester branch as ill-conceived.
“The Rochester office has been an engine funding the growth of small business here, the only source of job growth we have,” said Bal Dixit, president of Newtex Industries Inc. His Victor-based company now exports to more than 55 countries and “would never have gotten off the ground without the SBA.”
Dixit and other small-business leaders helped rebuff attacks on the SBA under the Reagan administration.
“I said then the SBA loan program was the one government program that was paying its own way and proving its value to the economy,” Dixit said. “I’m prepared to say it again.”
Other business owners echoed Dixit.
“This company would not be in New York State and more than 100 people in New York State would not have jobs if it hadn’t been for Peter Flihan and the Rochester SBA office,” said Richard Clark, co-owner of Clark Moving & Storage Inc. Flihan is director of the Rochester branch office.
The company’s revenues total almost $6 million annually, said Clark, who added: “That’s 6 million New York State-taxed, federally taxed dollars.”
Nearly 10 years old, Clark Moving & Storage “could never have opened and would never have survived the first year,” without assistance from the local office, Clark said.
“No bank would touch us, let alone believe in us, the way the local SBA people did,” he said.
In addition to loan guarantees, the local office’s professional development advice was critical to the company’s survival, Clark said.
Employing more than 90 people and looking at $10.5 million in sales this year, Rogers Corp. was stuck in a building condemned for urban renewal some years back when the SBA stepped in to help. Without SBA aid in relocation, the firm would not have survived, President Arthur Rogers said in a letter to the local office. Rogers called the Rochester branch office “indispensable.”
SBA budget cuts will not touch the Service Corps of Retired Executives program, SBA spokesman Stamler said. SCORE puts retired businesspeople together with new and small companies for free consultation on management, marketing and financial issues.
More than 100 local volunteers operate out of the Rochester branch office under the SCORE program. It gives them administrative and scheduling support, and provides space for meetings and workshops.


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