New SBA district director optimistic on economy

The new director of the SBA's Kansas City district, which includes Springfield, has a bright perspective on the economy.

"I'm very optimistic," said Gary L. Cook, district director, Kansas City District, Small Business Administration. "We're not going to have a recession of any kind."

Cook's optimism is hardly blind. The new director, who will oversee SBA activity in 89 counties in Missouri and Kansas, has facts, figures, and even includes a ready acknowledgement of the recent economic picture.

The slowdown

"The economy is beginning to slow," he said. "We've been flying at about 80 miles per hour, but now we're down to about 40 or 50. It's still fast, but seems a lot slower.

"I think some of the slowdown is due to some anxiety on the part of consumers and businesses who have simply taken a step back and are waiting to see what will happen, like where the feds will take interest rates. But we appear to be a bit over that hump now. The recession, if you will, didn't come. Businesses still need capital to move forward."

Cook expects "a little bit of slowing through the first half," noting that "There's still some settling out in the high-tech industry. Obviously utility costs in the short term hurt, and the election process created some uncertainty. But I think once we get to the middle of the year, that stuff will have cycled through."

Growth

Cook predicts continued, if slower, growth.

"I don't see the 5 percent growth we've had continuing, but at least 2 or 3 (percent)," he said. "We're seeing some things based on our involvement in the small business community. The businesses we're doing business with are fundamentally strong. What we're seeing from the lending community is that because of the long economic good times, lenders have become much more aggressive on the commercial side. As the economy begins to settle out, they're looking more toward the SBA for deals they would have done two years ago on their own."

Of the economic picture in southwest Missouri, which he says has showed "a little bit of slowing in the last couple of months," Cook said, "What we're blessed with is an abundance of commercial lenders, especially banks, who are very much consumer friendly, specifically in the Springfield/Branson area. Consistency is the word. We really don't see much difference in the aggregate picture in the region."

Cook knows southwest Missouri well.

"I earned my undergraduate degree at Southwest Missouri State University and went on to pick up a doctorate in public policy and administration. Then, I was also involved in agribusiness closer to Joplin."

With the SBA for 13 years, Cook comes from a corporate background, having worked for Shell Oil, Litton Industries and in telecommunications. He also has owned his own businesses.

SBA changes

Cook credits businessman Erskine Bowles, who was appointed to head the SBA in 1994, for some realistically positive changes in the agency's operations.

"A 20-year owner of his own banking firm," Cook said, "what he brought to the table was a real sense of how business should be conducted from the business side. He was with the SBA two years and left to become chief of staff at the White House."

Bowles, said Cook, was responsible for changing the SBA's red-tape, paper-heavy image.

"During his tenure we came out with lowdoc' or low documentation' loans," he said. "Now a loan of $150,000 or less requires a one-page application form."

The SBA has changed significantly in other ways, as well. Many aspiring entrepreneurs are unaware that the agency no longer loans money itself but serves as a guarantor of loans extended by commercial lending institutions.

Gap lending

"In simple terms," he said, "business needs capital. If a borrower goes to a commercial lender, if they can make a deal with the bank, SBA is not needed. We are what you might call a gap lender." You're starting a business, for example, and the deal appears to be viable. Cash flow is there, equity is there, but collateral is lacking. So in that case the bank would like to do the deal, but needs collateral, and the bank would like something to offset that risk. That's when the SBA steps in.

"The typical working capital loan generally is one to three years. With an SBA guarantee offsetting that risk, the term of the loan can be seven years. About 10 years ago, SBA did loan the money itself and did less than a billion dollars a year. Now it does $15 billion a year. All we need to cover is the amount of loan loss. Across the U.S., our default rate is only a point or two below a typical bank. How many of those loans are being paid? In excess of 90 percent."

Cook also corrected some misunderstandings about the eligibility of businesses for SBA assistance. The SBA, he said, could in fact more accurately be called the "Small and Mid-sized" Business Administration.

"We classify business by average sales and average number of employees. By SBA size standards, approximately 99 percent of the businesses in the U.S. are small. Eligible companies can have as many as 1,500 employees."