It’s the 65th anniversary year of the Small Business Administration (SBA) and the perfect time to take a look back at SBA success stories. While the SBA is synonymous with small business, some of today’s biggest companies started out as small businesses. As financing continues to be the biggest challenge for small businesses, the support of the SBA, and its diverse loan programs, is particularly relevant for the growth of businesses. The SBA mission is that “Small business is critical to our economic strength, to building America’s future, and to helping the United States compete in today’s global marketplace.” It’s interesting to reflect upon those small businesses, which once they received funding from SBA loan programs, ultimately grew to become major disruptors within their industries.
Let’s revisit the organization throughout the decades. After several war-related recovery efforts by governmental organizations supporting new and struggling small businesses, in 1953, Congress created the Small Business Administration. The function of which was to “aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.” The SBA charter stipulated it would ensure small businesses a “fair proportion” of government contracts and sales of surplus property. Five years later, the Investment Company Act of 1958 established the Small Business Investment Company (SBIC) Program, under which the SBA licensed, regulated and helped provide funds for privately owned and operated venture capital investment firms, which in turn, invested in small businesses.
It is under these programs that quite a few, very notable, businesses got their start.
Famous for manufacturing athletic apparel and footwear, Under Armour was created just over 22 years ago. Kevin Plank, Founder of Under Armour, started the business out of his grandmother’s basement. Plank was an athlete that struggled with constantly changing out of sweat-soaked T-shirts during two-a-days and knew there had to be a better way to get dressed. He conducted research on synthetic fabrics and their athletic benefits, designing the first Under Armour HeatGear T-shirt. This revolutionary product is engineered with moisture-wicking performance fibers, allowing athletes to stay dry and cool no matter how sweaty the situation.
By the end of 1996, Plank made his first team sale, and Under Armour had generated $17,000 in sales. The company received support in its infancy from the U.S. Small Business Administration. In 2016, Under Armour received the first ever inaugural Hall of Champions award. Thanks to the startup funding from the SBA, Under Armour has transformed itself into a global multi-billion-dollar company.
In 1993, Steve Ells, a former chef, launched Chipotle Mexican Grill in Denver, Colorado. Funded by Ells’ father ($85,000), the first Chipotle storefront was established with the goal of funding a fine dining restaurant. One small business to fund another. The second store was opened with funds from the first. The third store leveraged SBA funds. In 1998, McDonald’s became an investor in Chipotle and in 2006, Chipotle went public. This is an example of where the SBA loans can fill a gap in combination with other loan sources, such as financial support from friends, family and large investors.
In 1978, the SBIC program, which is a venture-capital branch of the SBA, was formed to support further investment in start-ups. The SBA’s Small Business Investment Company (SBIC) provides for privately-owned venture capital funds licensed by the SBA to invest in the long-term debt and equity securities of small businesses. Continental Illinois Bank, owned by John Hines, was the SBIC-funded bank that awarded $500,000 in start-up capital to a fledgling computer startup called Apple Computer. While success stories such as Apple are rare, the funding of Apple by an SBIC whose owner had strong foresight was a significant and notable success story of the SBA’s programs. There may be no greater success story than Apple, funded by SBA programs at its infancy, becoming the first US company valued at $1 trillion.
While the SBA is perhaps best known for small business loans, many different SBA programs, such as the SBIC program, have helped build worldwide brands. At the 65th year of the SBA, it’s a great time to look at the broader services and mission of the U.S. Small Business Administration – to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation. Although the SBA has grown and evolved in the years since it was established in 1953, the bottom line mission remains the same. The SBA helps Americans start, build and grow businesses – not just small ones, but, ultimately, big businesses, too.