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Q&A with former SBA Administrator Karen Mills

Bob Stein, Executive Director of the IEE, had a chance to interview former SBA Administrator Karen Mills on topics related to her role and her thoughts on small business support and development during this pandemic. The IEE greatly appreciates the time and consideration Administrator Mills provided for our team and small business community. These questions were provided by management consultants at the University of Pittsburgh Small Business Development Center (SBDC), which provides consulting assistance at no-cost. To request assistance e-mail

Karen Gordon Mills is a Senior Fellow at the Harvard Business School and a leading authority on U.S. competitiveness, entrepreneurship and innovation. She was a member of President Barack Obama’s Cabinet, serving as the Administrator of the U.S. Small Business Administration from 2009 to 2013, and is an expert on the economic health and well-being of the nation’s small businesses. More information can be found on and you can follow her on Twitter at @KarenGMills.

As SBA Administrator, what was the most challenging part of your job?

KM: I was SBA Administrator during an extremely difficult time for our country’s economy. The first quarter I was in office, we lost almost 2 million small business jobs. Small businesses were getting absolutely crushed, particularly because it was a credit crisis. Before 2008 and 2009, small businesses would traditionally obtain capital by going from bank to bank until someone said yes, but when the recession hit, banks began to tighten their lending, even pulling credit lines from small businesses that had never before defaulted on their loans.

The crisis brought to light that access to capital is essential to small businesses, which in turn are essential to our nation’s economy. Half the people who work in the U.S. own or work for a small business – that’s half the jobs. And there are 30 million small businesses. Despite these facts, it was still difficult to convince everyone how important small businesses are to the economy. Traditional macroeconomic models completely ignore small business because they focus on consumption: consumers, government spending, investment, and the like. I often had to pound the table in the White House to make sure that small business voices were getting heard. This is why it is so wonderful now to see policy responses prioritizing small business. Never did I imagine I would see the words “$349 billion” and “SBA” in the same sentence, but that’s exactly what I saw in the CARES Act—small businesses literally being put first. I hope we continue to keep small businesses top of mind as we discuss further COVID-19 relief packages.

What would your top 3 lessons learned from this pandemic for business owners?

KM: This crisis has forced people to recognize how essential small business is, not just in terms of economic output and job creation, but in the ways that small businesses contribute to their communities not just in peacetime, but also in moments of crisis like we find ourselves in now—something that cannot be measured or defined by economic models.

The pandemic is also forcing small business owners to reevaluate their business models and ideas, which may be a silver lining for the future. The businesses, new and old, that emerge in the recovery will have the experience and forethought to make changes and plan for the unexpected, which will only serve to make our small business economy stronger.

Given the crisis, along with the drastic movement in technology use, what services do you think the SBA could pivot to offer in the future to help businesses better?

KM: Just as we have seen cloud services and 5G networks revolutionize the way people keep in touch and migrate work online in this crisis, much of the good work that SBA does in counseling small businesses is moving into a digital format. There is a big opportunity here to discover what works and what does not, and to keep the positive learning for after the crisis. In the realm of SBA loans, Amazon Web Services has been critical in updating the old eTran system. The crisis has made clear how outdated some ways of working and certain systems are, and I think it will mark a fundamental shift in how we do contingency planning and elevate digital capabilities in a broad swath of government agencies.

We are also witnessing how nimble fintech and other nonbank players can be in serving small businesses, particularly those that need small dollar loans that are not traditionally profitable or desirable for the large banks to make. If PPP gets replenished and these new nonbank firms succeed at quickly and efficiently funding small businesses, I think policymakers, regulators, and small businesses will take notice. They will remember who helped them in the crisis and this may in turn change the entire small business lending landscape for the better.

Do you think the SBA and Federal Government are doing the right things for business owners during this crisis?

KM: It is clear that the SBA and Treasury understand that small businesses are hit disproportionately hard by economic downturns. This is true for a number of reasons. Given their size, small businesses possess relatively small cash buffers – JPMC Institute research has demonstrated that the average small business has 27 days of cash reserves on hand, and for certain businesses, like restaurants and other smaller businesses on Main Street, that number is even less. What this means is, when a small business experiences an economic shock, or even something less dramatic like a customer not paying its bills or paying an invoice late, the small business’s cash flows are deeply affected. While they are waiting to receive this money, they still have to pay expenses like rent, inventory, payroll, and the like. The unique nature of this crisis emphasizes these financial shocks – the loss of foot traffic due to social distancing and mandated shelter-in-place orders means an even more severe loss of revenue than simply a customer paying late, so small business owners are feeling the cash squeeze right now.

That is why efforts like the Paycheck Protection Program and SBA’s Economic Injury Disaster Loans are essential for keeping small businesses solvent and to keep employees on the books. It is much more difficult to start up a business again once it has failed (we learned this lesson the hard way after the financial crisis) – so that is the logic behind programs like those that have been implemented in the United States and elsewhere. Yes, implementation has been incredibly bumpy, but it is a wonderful thing that the government is providing aid to small businesses and promising to forgive these loans so long as they are used for keeping employees on the books. It is even better that last week, we saw nonbank lenders get approved to participate in administrating loans—companies like PayPal, Square, and Intuit QuickBooks. These players fill a much needed gap in the small business lending space, targeting and serving the smallest, most vulnerable businesses. The average PPP loan size for these firms sits around $25,000 to $40,000, whereas the average of approved PPP loans as reported by the SBA is $240,000.

Unfortunately, as demonstrated [on April 16, 2020] when the well dried up, $349 billion is a great start, but it is not enough. Congress needs to pass additional relief for small businesses now to help them get through this crisis and begin to think about what a recovery would look like.

If you were a business owner now, what would you do to weather the storm?

KM: Familiarize yourself with all of the relief options available from the federal, state, and local government (review the Treasury and SBA sites and your local government’s economic development sites). If you have a preexisting relationship with a banker, get in touch if you haven’t already so you understand what they can do to help you weather the storm, whether this is applying for a Paycheck Protection Program loan, Economic Injury Disaster Loan, state aid package, or other forms of funding. Do not wait for the PPP funding to be officially replenished – start gathering the necessary paperwork now and be ready to apply.

Small business owners should also look into private sector programs. Facebook announced a $100 million small business grants program in March, which is set to start accepting applications this week. Certain fintech companies like Kabbage and Fundbox have propped up programs to assist small businesses, from a gift card purchasing portal to a #paytoday campaign that encourages large corporations to pay their small business invoices now. Chime, the digital bank, announced a pilot project wherein it is spotting customers $1,200 while they await their stimulus checks. See if you can encourage your bigger clients to pay existing bills, ask your landlord to delay rent, ask for loan forbearance. No matter what you do, hang in there. Small businesses make up the fabric of our communities and this is a critical time for all of us to do our part to support them.

Besides the CARES act and Main Street lending program, what else do you think will need done?

KM: Even if we make all the right decisions, I suspect we will still lose 20 percent of small businesses, and they will be less inclined to start up again. The health and safety of the public is paramount, but as we start to see the other side of this crisis, it will be important to encourage entrepreneurship. Prior to COVID-19, we were already observing a worrisome decrease in start-ups, so this will be even more important in the recovery. I can see the federal and local governments championing something like a “Restart America” or “Main Street Recovery” program, where small business entrepreneurs can compete for grant funding to fill those empty spaces on Main Street. This could be an opportunity for cross-sector collaboration—public and private sector players working together with nonprofits, CDFIs, local small business counseling groups, and the like—to help people get excited about entrepreneurship and providing them with the support and advice they need to succeed and rebuild.

What advice would you give to a person who was planning to start a business when all this happened?

KM: Even in this terrible crisis, there is opportunity for innovation. People can do amazing things under pressure—we’ve already seen it in the heroism of our healthcare workers on the frontline; people printing 3D masks and donating them to hospitals; the massive push from institutions of higher education all around the country to move classes onto Zoom. Restaurants have pivoted from dining in to exclusively delivery, while also running campaigns to feed our doctors and nurses.

Small business owners, at their core, have an entrepreneurial spirit and they too can find ways to innovate. To those individuals who have a business idea that was curtailed by COVID-19, I say – don’t give up on that dream. After this public health crisis is over, we will need you more than ever. Think about your business idea with a fresh eye. You may realize that you have planned out certain things that are not necessary to run the business well. Perhaps there are expenses you can cut out when you start and ask yourself focused questions: who are the customers you want to serve and what products will they really value? If you did not have a plan to sell online, maybe this crisis will show you that you need to. Think about how you are going to change your business idea for the better for the future and view this as an opportunity.