How to Implement and Manage Successful Change Programs

In today’s organizations, the rate of change has never been more rapid or more constant. Whether the change is a small one, like the implementation of a new system, or a much bigger one such as a company takeover or merger, the way that change is managed makes all the difference to its success or failure. Good change management training is essential for supporting leaders and managers to effectively drive change throughout their organizations.

People rarely welcome change. As human beings we tend to be adverse to change and, in a world which is increasingly changing at an alarming rate, people can be skeptical and resistant to anything that threatens the status quo of their working lives. It is also fair to say that not all change is positive. Sometimes it seems that doing things differently does not actually equal doing things better in the long run.

With this in mind, introducing change and transformation has to be done carefully, sensitively and collaboratively. Managing people through change training courses equips leaders and managers with the essential skills to seamlessly implement change within their organizations.

1) Communicate the Rationale Behind the Need for Change

The first stage of introducing any change, however large or small, is to explain to employees why it is important for the change to occur and the intended benefits. This needs to be handled carefully and communicated to all affected parties. There should also be adequate opportunity for people to voice their concerns and contribute their thoughts, views and opinions.

Missing out on this stage of the process will almost certainly damage the change process before it has even properly begun.

2) Implement the Change in Phases

Change is usually best received when it is implemented in bite sized chunks, unless of course, this is impossible (as in the case of mass redundancy or bankruptcy). Most change can be broken down into phases that can be reviewed along the way.

Collaboration is key so, if circumstances allow, having a pilot group of employees to test the change before it is fully embedded is a good way to ensure that more people ‘buy in’ to what is happening and why.

3)  Evaluate, Review and Report on Change

Careful monitoring of the entire change process is essential in order to be able to measure its impact and evaluate its success. People need to be kept informed about how things are progressing, the results that are occurring and whether the change program has met its objectives.

An organization’s intention when it decides to embark on a change program is usually to make improvements. It is, therefore, important that employees understand whether the change has had the desired effects and what is to be done if further work is needed.

Change Quote Photo via Shutterstock

Two Signs You Need To Perform CPR On Your Website and the Five Steps To Bring It Back To Life

There are two principal reasons why a person would build a website: to sell a product or to gain attention through stories. In both cases, you need to appeal to your visitors and make sure they do what you want them to. Once you have visitors, it’s important that they stay on your site. To do that, you really need to keep their attention by providing content and products that appeal to them.

Analytics provide deep insight into whether your site is appealing to visitors. It’s not enough to just have visitors, they need to stay on your site. Here are two ways to know if you really need to perform CPR on your site:

• Your bounce rate’s high. When a person enters your site, looks at the page they landed on, and leaves, this is known as a “bounce.” The “bounce rate” determines the percentage of visitors who leave your site after looking only at one page. A “high” bounce rate (above 70%) isn’t always bad. If you have a blog, for example, you can’t expect many people to gain loyalty. If the bounce rate is close to 100%, no one is really finding your site very interesting. When you’re seeing rates of 80 or above, alarm bells should be ringing. To find our your bounce rate, implement analytics software for your site (Google Analytics or Clicky are good starts).
• The average amount of time spent on your site is low. If your bounce rate is high, but the average visitor spends more than the amount of time a fast reader would read the page he/she landed on, you’re engaging your audience. The amount of time someone spends on a page is a good measure of engagement. But you must be aware that cumulative engagement doesn’t tell you the full story. Some of your visitors may spend 10 minutes on a page while spending only 20 seconds on another before pressing the “Back” button or closing the tab. If you’re noticing that people are spending a grand total of 20 seconds on average through your entire site, though, you really need to consider remodeling.

If you fulfill any of those criteria, here’s the procedure for CPR:

• Label sections of your content correctly. This is more a piece of advice for those running blogs, but retailers should take note nonetheless! Readers have the attention spans of sugar-rushed toddlers. They don’t like reading enormous blocks of text. If you have a gigantic masterpiece on your site, split it up into sections and label them properly, using an H1 (biggest) or H2 (“not-so-big-but-still-relatively-large”)  tag. I wouldn’t go any smaller than H2 unless I’m marketing something. The smaller you go, the less clear the divisions will seem (unless, again, it’s strictly marketing material, a whitepaper, or it’s a “product details” section). If you must use a smaller tag, provide sufficient spacing to make it clear to the reader that they’ve entered a new section. The ideal size for one block of text should be 250 words. If you feel uncomfortable with dividing things, just do what I do: Make each major point in bold writing.
• Go mobile! When a run-of-the-mill site is seen through a smartphone, it takes quite a painstaking effort to actually read everything on the page. If you get a mobile template for the site or hire someone to develop it, you will be giving a whopping 29% of the internet’s users an easier viewing experience. This percentage will continue to grow as mobile adoption becomes more commonplace. Also, when adopting a mobile viewing platform, make sure that all text formatting is visible on the screen. Some site templates give mobile users a minimal rendering of the text, which makes it difficult to tell where the section headings are. Bold text will appear normal and section headings will be reduced in size considerably.
• Keep it simple. Not all your visitors will be college graduates, and even college graduates get overwhelmed by “sophisticated” language. Unless you’re selling fancy luxury products, there’s no need to be poetic. Your language should be readable even to someone who is taking 6th grade English Literature classes. Use this tool to determine how readable your page is. If its readability is somewhere around 7th grade, you’ll easily engage most of your visitors. This is the sad reality of the internet, but we have to put customers first!
• Get rid of all the clutter. Chances are your site has some element within it that makes it difficult to focus on the primary content (the content you really want someone to read). Eliminate all the distractions that appear around that content, immediately. Distractions can irritate some visitors who believe that they might have reached the wrong site. Make sure that your site is presentable, looks navigable, and says everything it can in the shortest way possible.
• Get someone else to look at your site. Sometimes, the best advice doesn’t come from a professional, but from a person who has no skills in web optimization. Invite a regular Joe to look at your site and ask him to tell you only what’s wrong with it. Encourage this person to look at the site not from an advisory perspective, but as a consumer. What’s particularly frustrating about it? Do this with more people and analyze your results after taking notes. When something appears frequently, resolve it!

This advice, although it looks simple, is easier said than done. You’ll have to spend a large amount of time straightening out your site, perhaps more than you spent setting it up in the first place. However, the benefits far outweigh the costs when you think of how presentable the site will be after this. Always remember to get into your customer’s mind when making any future changes for your site. Print this guide up and refer to it every time you want to build onto your masterpiece!

Google Plus Now Integrated with Authorship Program

[Google Authorship Examples]

You may already be familiar with the Google Authorship program. Going for some time now, the program allows authors to sign up and link their Google profiles to content they create on the Web.

When the content comes up in a Google search, the author’s name, photo and a link to their Google profile appears next to the results.

The personal branding benefits are obvious. But now Google is making the authorship process more social too.

The company recently announced it would be integrating Google Plus with the Authorship Program. This means that future posts would be associated with an author’s Google Plus account, assuming they have one.

In a recent post on the official Goggle Plus Developers Blog, Seth Sternberg, Director of Product Management for Google Plus explains:

With this association in place, we can look for ways to surface your info when it’s most relevant. For example, today users may see your name, picture and/or a link to your Google+ profile when your content appears in Search, News and other Google products.

From Google’s perspective, the reason for the move is obvious. Creating links to authors’ Google Plus profile may encourage content creators who haven’t yet done so to create an account. It could also encourage those with a Google Plus account who haven’t yet participated in the Google Authorship program to do so.

Finally, integration will probably lead to greater engagement on Google Plus. This is because links in search results will encourage more readers to connect with their favorite authors socially and perhaps encourage more interaction over blog topics there.

Small business owners, entrepreneurs, marketers and other Google authors will benefit too. The integration will allow increased networking around content created on other sites whether that content has been shared socially or not.

To take advantage of the new integration, content creators will need to first create a Google Plus account, if you have not done so already.

Then visit the authorship signup page and either verify an email address from the domain where your content is being published or an alternate email address which will then be associated with your Google Plus account.

You must also make sure a high quality head shot is available on your Google Plus account, and that your byline on the account matches the byline used on your content elsewhere.

Two Signs You Need To Perform CPR On Your Website and the Five Steps To Bring It Back To Life

There are two principal reasons why a person would build a website: to sell a product or to gain attention through stories. In both cases, you need to appeal to your visitors and make sure they do what you want them to. Once you have visitors, it’s important that they stay on your site. To do that, you really need to keep their attention by providing content and products that appeal to them.

Analytics provide deep insight into whether your site is appealing to visitors. It’s not enough to just have visitors, they need to stay on your site. Here are two ways to know if you really need to perform CPR on your site:

• Your bounce rate’s high. When a person enters your site, looks at the page they landed on, and leaves, this is known as a “bounce.” The “bounce rate” determines the percentage of visitors who leave your site after looking only at one page. A “high” bounce rate (above 70%) isn’t always bad. If you have a blog, for example, you can’t expect many people to gain loyalty. If the bounce rate is close to 100%, no one is really finding your site very interesting. When you’re seeing rates of 80 or above, alarm bells should be ringing. To find our your bounce rate, implement analytics software for your site (Google Analytics or Clicky are good starts).
• The average amount of time spent on your site is low. If your bounce rate is high, but the average visitor spends more than the amount of time a fast reader would read the page he/she landed on, you’re engaging your audience. The amount of time someone spends on a page is a good measure of engagement. But you must be aware that cumulative engagement doesn’t tell you the full story. Some of your visitors may spend 10 minutes on a page while spending only 20 seconds on another before pressing the “Back” button or closing the tab. If you’re noticing that people are spending a grand total of 20 seconds on average through your entire site, though, you really need to consider remodeling.

If you fulfill any of those criteria, here’s the procedure for CPR:

• Label sections of your content correctly. This is more a piece of advice for those running blogs, but retailers should take note nonetheless! Readers have the attention spans of sugar-rushed toddlers. They don’t like reading enormous blocks of text. If you have a gigantic masterpiece on your site, split it up into sections and label them properly, using an H1 (biggest) or H2 (“not-so-big-but-still-relatively-large”)  tag. I wouldn’t go any smaller than H2 unless I’m marketing something. The smaller you go, the less clear the divisions will seem (unless, again, it’s strictly marketing material, a whitepaper, or it’s a “product details” section). If you must use a smaller tag, provide sufficient spacing to make it clear to the reader that they’ve entered a new section. The ideal size for one block of text should be 250 words. If you feel uncomfortable with dividing things, just do what I do: Make each major point in bold writing.
• Go mobile! When a run-of-the-mill site is seen through a smartphone, it takes quite a painstaking effort to actually read everything on the page. If you get a mobile template for the site or hire someone to develop it, you will be giving a whopping 29% of the internet’s users an easier viewing experience. This percentage will continue to grow as mobile adoption becomes more commonplace. Also, when adopting a mobile viewing platform, make sure that all text formatting is visible on the screen. Some site templates give mobile users a minimal rendering of the text, which makes it difficult to tell where the section headings are. Bold text will appear normal and section headings will be reduced in size considerably.
• Keep it simple. Not all your visitors will be college graduates, and even college graduates get overwhelmed by “sophisticated” language. Unless you’re selling fancy luxury products, there’s no need to be poetic. Your language should be readable even to someone who is taking 6th grade English Literature classes. Use this tool to determine how readable your page is. If its readability is somewhere around 7th grade, you’ll easily engage most of your visitors. This is the sad reality of the internet, but we have to put customers first!
• Get rid of all the clutter. Chances are your site has some element within it that makes it difficult to focus on the primary content (the content you really want someone to read). Eliminate all the distractions that appear around that content, immediately. Distractions can irritate some visitors who believe that they might have reached the wrong site. Make sure that your site is presentable, looks navigable, and says everything it can in the shortest way possible.
• Get someone else to look at your site. Sometimes, the best advice doesn’t come from a professional, but from a person who has no skills in web optimization. Invite a regular Joe to look at your site and ask him to tell you only what’s wrong with it. Encourage this person to look at the site not from an advisory perspective, but as a consumer. What’s particularly frustrating about it? Do this with more people and analyze your results after taking notes. When something appears frequently, resolve it!

This advice, although it looks simple, is easier said than done. You’ll have to spend a large amount of time straightening out your site, perhaps more than you spent setting it up in the first place. However, the benefits far outweigh the costs when you think of how presentable the site will be after this. Always remember to get into your customer’s mind when making any future changes for your site. Print this guide up and refer to it every time you want to build onto your masterpiece!

Stop the Headaches: Review of Freshbooks Invoicing

Let’s face it, billing customers is a pain. Keeping up with outstanding invoices and requests for payment are time-consuming, to say the least. This review of FreshBooks, one of the leading invoicing and financial-tracking solutions, is for any small business owner who needs to get a handle on the “making sure you get paid” part of business.

Invoicing With Freshbooks

FreshBooks signup is easy, fast, and free. No credit card required, which is always helps reduce signup friction. You can trial the software for 30 days for free, then decide on a paid plan or a forever-free plan. Of course, the free plan is limited, but it may work for your business. Paid plans start at $19.95 per month. With over five million users, the company has an established track record.

FreshBooks started as a tool for managing invoicing, collections and revenue tracking.  The company has expanded to what they call a cloud accounting platform.

To be clear, Freshbooks is not a full traditional accounting package.  For instance, the expense features are more about importing expense payments you’ve made via bank, PayPal or credit card accounts, so that you can keep track and run reports in Freshbooks.  The software isn’t really designed to let you enter expenses directly in it, track payables, handle payroll or other advanced expense payment features.

However, for very small businesses â€" such as solo entrepreneurs, or an uncomplicated business such as a small Web design firm with a handful of clients â€" what Freshbooks offers may be quite sufficient for their “accounting” needs.

Roughly half of the small businesses in the United States are single person businesses, or partnerships such as a husband and wife team.  Most of them do not need a full double-entry accounting package in the traditional sense.  They need to get paid on time by their customers. They may need to track their hours in order to generate accurate invoices.  They need to run reports to see if they are earning a profit and for taxes.  They may already have good records about their expense payments (many of which may be already set up as recurring electronic bill-pays or automatic debits, anyway).  So they may have no need to separately enter expenses and bills in an accounting system - doing so would just add complexity.

And when you factor in features such as time tracking and integration with other software platforms and solutions., Freshbooks offers plenty of value.  Sage 50, for example, has an add-on tool, as does MailChimp, Gmail, Zendesk, and others with Freshbooks.

Creating An Invoice

Let me jump right to the core of what most business owners claim is their biggest hassle - creating and tracking an invoice. As you see in the screen below, you fill in the details and, well, FreshBooks generates the invoice. Most likely, you will send it via email, but just about every other way to send an invoice is possible.

I’m sure that when “Deliver by Drone” becomes available, FreshBooks will have it.  Note: This is not a military drone, by the way, but a growing number of startups are testing how to deliver parcels by remote control quadcopters.  No kidding.

What I Really Like:

• Invoices can be created on a mobile phone, on a tablet or using a computer. They have apps for iPad, iPhone and Android.
• FreshBooks will print an invoice and send it via postal mail for a small fee. This is great for that one-off invoice for a client who is not digital.
• Great focus on invoicing and time tracking. They know what their customer wants and they make it easy to get those things done.

What I Would Like to See:

There is a forever-free level account, but you can’t sort out what that entails once you start the 30-day free trial. It is a small point - I’m sure they make it clear after the trial. For the record, you can have three clients on the forever free plan. From all I can tell, you can change those clients and invoice new ones, but the maximum number is three.

FreshBooks is a single-entry system, and does not have a traditional general ledger. That works for many business owners, for whome paying expenses is fairly straight forward. If your focus is on tracking time accurately and keeping your invoicing process in a healthy system, FreshBooks is the package to check out.

Engajer Takes Social Media Engagement To The Next Level With Innovative Video Tool

Finding the right combination of social media platforms to use for promoting your business is not just a challenge, but often times a struggle of balancing precious time between promotional efforts and other business activities.  Thankfully, user-friendly tools for connecting with prospects and existing customers such as TweetDeck and Hootsuite will help to increase your consistency of communication without consuming too much of your time.  engajer, another helpful tool, recently announced that users can now embed interactive video presentations directly into their Facebook pages to delivery company information.

Businesses are always looking to find other innovative ways to market on Facebook and engage followers.  What engajer does is provide a video platform that breaks down a company’s content into simple to understand segments of 30 seconds each.  Unlike YouTube, engajer allows viewers to navigate through presentations according to their preferences. In other words, viewers have the power to respond to each clip by choosing the next module to view or selecting another action, such as responding to a call to action or sending an email. It leads to deepened engagement with social media-minded Millennials as well as Generation X’ers and Baby Boomers, who also use Facebook.One engajer will take the viewer to another selection, and then another, and so forth.  These content components can then be tracked, which  provides insights into the viewers’ behaviors and the content they want to see and the content they engage with.  For an example of how itworks, check out Todrick Hall’s engajer!

This interactive video presentation can be customized to fit your business and is free to get started.  There is a charge if you require the assistance of engajer to produce your video or if you choose to use its dashboard analytics tool.  The company also takes a small percentage of each revenue transaction if you are selling something through your engajer e-commerce model.  To get started, the user simply pastes a link to embed their engajer directly into their Facebook page.  And, because the visitor to your Facebook page has a short attention span, engajer fits the bill as it doesn’t take the visitor to another site when clicked on, but remains on your Facebook page.

Other tools for enhancing brand engagement on Facebook have proven helpful to small businesses.  One such a tool is Alerti, a social media monitoring and management service that scans online press, blogs, forums, and social networks allowing you to follow what is being said about you, your brand or your competitors on the Internet.  Comparatively, the beauty of engajer is that you get to offer topics, or “engajers” about your business and the viewer gets to choose what they want to learn about you.  The viewer gets these little bites about your company and what you have to offer.

Engaging your prospects and customers via social media can sometimes feel like a full-time job.  Cool tools like engajer can lighten the burden offering something more than static ads to help increase your company’s exposure and profitability.

Engajer Takes Social Media Engagement To The Next Level With Innovative Video Tool

Finding the right combination of social media platforms to use for promoting your business is not just a challenge, but often times a struggle of balancing precious time between promotional efforts and other business activities.  Thankfully, user-friendly tools for connecting with prospects and existing customers such as TweetDeck and Hootsuite will help to increase your consistency of communication without consuming too much of your time.  engajer, another helpful tool, recently announced that users can now embed interactive video presentations directly into their Facebook pages to delivery company information.

Businesses are always looking to find other innovative ways to market on Facebook and engage followers.  What engajer does is provide a video platform that breaks down a company’s content into simple to understand segments of 30 seconds each.  Unlike YouTube, engajer allows viewers to navigate through presentations according to their preferences. In other words, viewers have the power to respond to each clip by choosing the next module to view or selecting another action, such as responding to a call to action or sending an email. It leads to deepened engagement with social media-minded Millennials as well as Generation X’ers and Baby Boomers, who also use Facebook.One engajer will take the viewer to another selection, and then another, and so forth.  These content components can then be tracked, which  provides insights into the viewers’ behaviors and the content they want to see and the content they engage with.  For an example of how itworks, check out Todrick Hall’s engajer!

This interactive video presentation can be customized to fit your business and is free to get started.  There is a charge if you require the assistance of engajer to produce your video or if you choose to use its dashboard analytics tool.  The company also takes a small percentage of each revenue transaction if you are selling something through your engajer e-commerce model.  To get started, the user simply pastes a link to embed their engajer directly into their Facebook page.  And, because the visitor to your Facebook page has a short attention span, engajer fits the bill as it doesn’t take the visitor to another site when clicked on, but remains on your Facebook page.

Other tools for enhancing brand engagement on Facebook have proven helpful to small businesses.  One such a tool is Alerti, a social media monitoring and management service that scans online press, blogs, forums, and social networks allowing you to follow what is being said about you, your brand or your competitors on the Internet.  Comparatively, the beauty of engajer is that you get to offer topics, or “engajers” about your business and the viewer gets to choose what they want to learn about you.  The viewer gets these little bites about your company and what you have to offer.

Engaging your prospects and customers via social media can sometimes feel like a full-time job.  Cool tools like engajer can lighten the burden offering something more than static ads to help increase your company’s exposure and profitability.

While Picking Pears: 3 Important Lessons Ramon Learned In Innovation, Timing and Position

Last week, I was picking pears from my pear tree. I learned 3 very important lessons in innovation, timing and position.

Not the home made “fruit picker”! Watch the video below or here.

While Picking Pears: 3 Important Lessons Ramon Learned In Innovation, Timing and Position

Last week, I was picking pears from my pear tree. I learned 3 very important lessons in innovation, timing and position.

Not the home made “fruit picker”! Watch the video below or here.

How Common are Small Business Administration (SBA) Loans?

Small Business Administration (SBA) guaranteed loans get a lot of attention in Washington. President Obama, for instance, believes that “the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations”, the Congressional Research Service reports.

Many in Congress agree. Over the past several years, our legislators have passed several bills to expand SBA funding and to boost the size of the agency’s loan guarantee program, the Congressional Research Service explains.

All this attention might suggest that SBA loans are a major source of small business finance. But the data show that SBA-guaranteed loans make up a small portion of the value of small business lending, and that an even smaller fraction of U.S. businesses receive SBA loans.

The SBA’s primary loan program - the 7(a) program - is designed to help businesses that might not otherwise receive outside credit obtain loans by guaranteeing a part of the funding provided by financial institutions.

The 7(a) helps only about one percent of American businesses obtain loans. In its 2013 Congressional Budget Justification, the SBA says that it had a portfolio of 7(a) loan guarantees to “271,000 small businesses at the end of Fiscal Year 2011.” The agency’s Office of Advocacy reports (PDF) that 27.5 million US businesses were operation in 2009, the latest year for data are available. Therefore, roughly 1 percent of U.S. small businesses have outstanding 7(a) loans.

The program’s share of bank loans is of similar magnitude. Comparison of the number of 7(a) loans outstanding in 2011 with Federal Deposit Insurance Corporation (FDIC) estimates of the number of commercial and industrial loans of less than $1 million (a common proxy for small business loans) outstanding in September 2011 shows that the number of 7(a) loans was approximately 1.4 percent of the number of small business bank loans.

The fraction of U.S. businesses that have any type of SBA-guaranteed loan is very small. According to the 2007 Survey of Business Owners (SBO), conducted by the U.S. Census Bureau, only 0.3 percent of U.S. businesses, and only 0.9 percent of businesses with employees, used a “government-guaranteed business loan to finance expansion.” Because SBA-guaranteed business loans are a subset of all government-guaranteed business loans, the fraction of businesses that used an SBA-guaranteed business loan to finance expansion cannot exceed this share. By comparison, 9.0 percent of U.S. businesses and 34.2 percent of businesses with employees used a bank loan to finance expansion.

Similar numbers can be seen for start-up funding. The SBO reveals that 0.7 percent of all businesses and 1.5 percent of businesses with employees used a “government-guaranteed loan to start or acquire a business.” By comparison, 10.7 percent of all businesses and 14.5 percent of businesses with employees used a bank loan to start or acquire a business.

SBA-guaranteed loans make up a larger fraction of the value of loan portfolios than their share of loans or borrowers because SBA loans tend to be relatively large. In 2012, the “total unpaid principal balance” of the SBA’s 7(a) loan guarantee program was $59.4 billion, according to a May 2013 Congressional Research Service report (PDF). This figure amounts to 5.2 percent of the SBA’s estimate of $1.1 trillion in outstanding bank and finance company capital provided to small businesses. However, this fraction is up significantly from the 3.6 percent it composed in 2007, SBA figures reveal.

A May 2013 Congressional Research Report suggests that the value of all outstanding SBA loans make up a larger fraction of small business lending. That report indicates that the value of the SBA’s portfolio of outstanding loans was $99 billion in fiscal year 2011, amounting to 9 percent of outstanding bank and finance company capital provided to small companies. However, the SBA’s 2011 fiscal year report hints that this number includes “defaulted guarantied business loans receivable, direct disaster loans, and direct business loans receivable.” Therefore, this figure may overstate the value of the SBA’s loan portfolio.

All-in-all, SBA-guaranteed loans make up a small portion of small business finance. Their outsize attention in Washington probably reflects the fact that they are the part of small business finance system that policy makers can influence most directly.

Question Photo via Shutterstock

How Common are Small Business Administration (SBA) Loans?

Small Business Administration (SBA) guaranteed loans get a lot of attention in Washington. President Obama, for instance, believes that “the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations”, the Congressional Research Service reports.

Many in Congress agree. Over the past several years, our legislators have passed several bills to expand SBA funding and to boost the size of the agency’s loan guarantee program, the Congressional Research Service explains.

All this attention might suggest that SBA loans are a major source of small business finance. But the data show that SBA-guaranteed loans make up a small portion of the value of small business lending, and that an even smaller fraction of U.S. businesses receive SBA loans.

The SBA’s primary loan program - the 7(a) program - is designed to help businesses that might not otherwise receive outside credit obtain loans by guaranteeing a part of the funding provided by financial institutions.

The 7(a) helps only about one percent of American businesses obtain loans. In its 2013 Congressional Budget Justification, the SBA says that it had a portfolio of 7(a) loan guarantees to “271,000 small businesses at the end of Fiscal Year 2011.” The agency’s Office of Advocacy reports (PDF) that 27.5 million US businesses were operation in 2009, the latest year for data are available. Therefore, roughly 1 percent of U.S. small businesses have outstanding 7(a) loans.

The program’s share of bank loans is of similar magnitude. Comparison of the number of 7(a) loans outstanding in 2011 with Federal Deposit Insurance Corporation (FDIC) estimates of the number of commercial and industrial loans of less than $1 million (a common proxy for small business loans) outstanding in September 2011 shows that the number of 7(a) loans was approximately 1.4 percent of the number of small business bank loans.

The fraction of U.S. businesses that have any type of SBA-guaranteed loan is very small. According to the 2007 Survey of Business Owners (SBO), conducted by the U.S. Census Bureau, only 0.3 percent of U.S. businesses, and only 0.9 percent of businesses with employees, used a “government-guaranteed business loan to finance expansion.” Because SBA-guaranteed business loans are a subset of all government-guaranteed business loans, the fraction of businesses that used an SBA-guaranteed business loan to finance expansion cannot exceed this share. By comparison, 9.0 percent of U.S. businesses and 34.2 percent of businesses with employees used a bank loan to finance expansion.

Similar numbers can be seen for start-up funding. The SBO reveals that 0.7 percent of all businesses and 1.5 percent of businesses with employees used a “government-guaranteed loan to start or acquire a business.” By comparison, 10.7 percent of all businesses and 14.5 percent of businesses with employees used a bank loan to start or acquire a business.

SBA-guaranteed loans make up a larger fraction of the value of loan portfolios than their share of loans or borrowers because SBA loans tend to be relatively large. In 2012, the “total unpaid principal balance” of the SBA’s 7(a) loan guarantee program was $59.4 billion, according to a May 2013 Congressional Research Service report (PDF). This figure amounts to 5.2 percent of the SBA’s estimate of $1.1 trillion in outstanding bank and finance company capital provided to small businesses. However, this fraction is up significantly from the 3.6 percent it composed in 2007, SBA figures reveal.

A May 2013 Congressional Research Report suggests that the value of all outstanding SBA loans make up a larger fraction of small business lending. That report indicates that the value of the SBA’s portfolio of outstanding loans was $99 billion in fiscal year 2011, amounting to 9 percent of outstanding bank and finance company capital provided to small companies. However, the SBA’s 2011 fiscal year report hints that this number includes “defaulted guarantied business loans receivable, direct disaster loans, and direct business loans receivable.” Therefore, this figure may overstate the value of the SBA’s loan portfolio.

All-in-all, SBA-guaranteed loans make up a small portion of small business finance. Their outsize attention in Washington probably reflects the fact that they are the part of small business finance system that policy makers can influence most directly.

Question Photo via Shutterstock