Small Business and Entrepreneurship Resource Center
Interview with Phillip C. Silva, District Director and Adrian Madrigal, Business Development Specialist, U.S. Small Business Administration’s El Paso District Office
Fourth Quarter 2010
Dallas Fed: What have been the biggest successes and challenges that your clients have faced since 2009? What successes and challenges do you expect in 2011?
Silva and Madrigal: The biggest success is the participation of community banks in the SBA guaranteed loan programs. In fiscal year 2010, two of them have done approximately 60 percent of SBA loans in the El Paso district.
Also, entrepreneurs in El Paso can access loans from SBA national lenders to form new businesses. These startup loans are up to $50,000. In this situation, the national lenders do not have depository accounts in El Paso, so borrowers open a business banking account with one of the local banks. It is our experience that startup businesses need access to SBA guaranteed loans.
Another success has been our 504 loan program. It is an economic development program designed to spur job creation. In 2009, SBA lenders in El Paso extended 16 of these loans; in 2010, they extended 27 of these loans—a nearly 70 percent increase. Most of these loans went to existing small businesses.
The biggest challenge has been to attract large banks to participate in our programs. We are talking about the $1 billion-plus financial institutions that have a national presence. They are doing very little SBA financing in El Paso.
In 2011 we anticipate the Small Business Jobs Act to continue to bring success to our clients.
El Paso is fortunate in that it is doing better than other parts of the country. The Fort Bliss expansion, new medical school, children’s hospital and maquiladoras all create and maintain jobs, so they have helped our economy keep steady.
The bounce-bank of the auto industry will also have a positive economic impact on El Paso. The maquiladoras are beginning to hire more people, and they generate business for suppliers, warehousing companies and companies in the transportation industry.
El Paso did not experience a large housing boom, so we’ve been able to weather the recession relatively well. Nonetheless, the economy is not as strong as it used to be. There is a continued slowdown in sales, so how businesses deal with the economy is the challenge we expect for them.
Dallas Fed: What have been the biggest successes and challenges that the SBA has faced since 2009? What successes and challenges do you expect in 2011?
Silva and Madrigal: We have a strong relationship with our network of lenders and business organizations that do SBA loans and offer technical assistance and contract procurement opportunities. The network of these business organizations includes contract opportunity centers via the U.S. Department of Defense; chambers of commerce, which do matchmaking events for contractors and buyers; small business development centers; women’s business center; and SCORE (Counselors to Americas Small Businesses).
The El Paso small business consortium consists of several of these organizations—the local contract opportunity center, two local chambers of commerce and some other business organizations. The consortium extends our outreach by creating awareness of SBA loans and is an important partner because it helps increase access to capital.
The media have also been a strong partner. They are attuned to what we are doing, and they write many articles about our programs and services, which creates huge awareness and generates a lot of interest in small business creation. In 2011, we expect a high increase in counseling cases through our partners.
We plan to continue providing government contracting opportunities for construction firms. Fort Bliss is now going into the services phase of development, so we anticipate that this phase will create more opportunities. We also work with other federal agencies, such as the Kirkland Air Force Base and Dyess Air Force Base, which we anticipate to be beneficial to small businesses.
The number of troops moving to El Paso is still increasing and will have a huge positive impact on our economy, bringing new customers to our service industry.
We are also experiencing an influx of residents fleeing the violence in Juarez, Mexico. There has been an exodus of people from Juarez into El Paso, and some of them are opening small businesses, such as restaurants, night clubs and other service businesses. Many of them are able to transition to owning a business in the U.S. because they owned a small business in Mexico and have dual citizenship. *
The SBA, through its partners, the small business development centers, women business centers and SCORE, provide technical assistance to all individuals seeking to start or maintain a small business. Most of these services are generally free of charge. As an equal opportunity lender and a federal governmental agency, the SBA does not discriminate and its mission is to serve, assist and advocate for small businesses.
We also expect our relationship with community-owned banks to continue to be strong.
Our challenge will continue to be the cautious approach of lenders. Getting financing for startup businesses will depend on how national banks and nonbank lenders perform and how El Paso attracts their interest when this area is not a primary market for them.
Dallas Fed: What impact do you anticipate the Small Business Jobs Act of 2010 to
have on you and your clients?
Silva and Madrigal: Over the short run, we think that there will be a significant uptick in loan approvals.
Under the jobs act, the SBA maximum loan limit has increased from $2 million to $5 million. This will make it possible for businesses that used the previous SBA capacity to become eligible for SBA guaranteed loans. There are also significant changes to the SBA 504 loan program that will allow refinancing of existing real estate loans.
Dallas Fed: What have we not yet discussed that you think is important to bring up, particularly to industry analysts, your constituents and/or policymakers?
Silva and Madrigal: The new medical school in El Paso is the first one that has opened in the U.S. in the past 25 years. It is projected to create 500 new jobs, so this will have a major economic impact.
In addition to the new children’s hospital and expansion of Fort Bliss, the highway construction and potential expansion of the new veterans hospital all will create many new jobs that will significantly impact our local economy. These projects are generating more interest in training and education. More people are going back to school to get into the higher paying jobs.
Last but not least, our housing market is going to explode. We are pretty close to capacity, and new apartment units and single family dwellings are being built to meet the growing demand.
*To qualify for SBA financial assistance, under federal guidelines, the applicant must be a legal permanent resident of the United States. With respect to legal aliens, this generally means that the applicant must have documented legal alien status. Also, the applicant must possess the ability to remain in the United States for at least the term of the loan.