John Scott

By Stephanie Tavares

Friday, April 10, 2009 | 2 a.m.

As district director for Nevada’s office of the Small Business Administration, John Scott is tasked with bolstering the state’s small businesses through a variety of government programs and services.

The native Missourian has taken his experience in the public and private sectors and applied it to his work helping promote small-business growth in his adopted state.

His office helps aspiring small-business people, entrepreneurs and minority-owned businesses improve their strategies, find the necessary financing and increase their companies in communities across the state.

IBLV: Tell me about the mission of the Small Business Administration’s regional offices.

Scott: SBA was founded in 1953 during the Eisenhower administration, and our charter or mandate or mission statement is to aid, counsel, assist and protect American small businesses.

We have an SBA headquarters in Washington, D.C., and emanating from that are 10 regional offices, which currently are staffed just by a lone person — the regional director — and an assistant. Those 10 regional administrators correspond to the 10 federal regions that were established in 1969 in the Nixon administration.

We’re part of Region 9, headquartered in San Francisco, that includes California, Nevada, Hawaii, Arizona, Guam and the American protectorates such as American Samoa.

There are 68 district offices across the United States stretching from the Virgin Islands all across the continental United States to Hawaii and Guam.

We have the Nevada district office here with the principal office in Las Vegas and an alternate work site in Reno. We have two people in Reno, a senior area manager and an area manager. And then down here we have six people on staff. Contrast that with the 20 people we had (in Nevada) in 2003.

On Oct. 1, 2003, began a slow but continuous decline in our staffing in the Nevada district office, but it was also a reflection of several factors. It was consistent with declines in district offices nationwide and it was also a reflection of the fact that the agency was transitioning in the manner it conducted its business.

Formerly, we did transaction analysis and financial processing, servicing, liquidation and litigation of loans inside our offices, where the banks would forward loans to us to determine if we, at the local district office level, would be providing a U.S. loan guarantee on the loans. We would also service the loans over time, if they went into technical default and the bank asked us to purchase the loan, and, ultimately, if the bank had to liquidate or litigate the loan in U.S. courts, we would do so at the local district office level.

The same type of transaction analysis and processing of the transactions occurred in government contracting functions as well at local district office level. However, since October 2003, many of these functions have been transferred to centers — we have processing centers, liquidation or loan purchase centers, servicing centers and even litigation centers. So the center concept took a lot of the work out of the district offices and put it in the central operations.

Our primary functions now are to tell our story and to sell our programs and services to the American public and those people who can benefit from them, such as the banking industry and the government contracting installations. That is what we do now.

There are three things we’re expected to do and do well: It’s marketing, outreach and promotion of our programs and services.

You have a varied professional background with experience in the corporate world. What brought you to government service and the SBA specifically?

I’ve always told people, including my own children, that the 20s is the most difficult decade of your life. You have so many expectations — often unrealized expectations. But the sense of when I graduate from high school I will do this and when I graduate from college, often with even more emphasis, I will do this. And oftentimes you don’t do that.

I was fortunate that I got my bachelor’s degree in general management in business administration with a minor in marketing. But typical of most college graduates, I graduated and was floundering to find that first job. Oftentimes in that same situation that every college graduate finds himself in: “Well, I’d really like to work here.” “Well, young man, we’re really looking for someone with experience.” “Well, sir, if you never hire me I’ll never get any experience.” So you find yourself like a dog chasing its tail.

But fortunately I got into the business world, got some exposure into operations and financial operations of business internally to see how they work and how they function best.

And then at the time of the Arab oil embargo I was able to transition from Mobil Oil Corp. and take all my institutional knowledge of the supply and distribution system to an oil company and the substitution capabilities of different petroleum products. I took that information at the time of the embargo in October 1973 and was able to go internal to this agency that was just beginning to form out of the office of the president — President Nixon’s administration.

The White House took the Office of Oil and Gas, extracted it from the Department of the Interior and created the Federal Energy Office in October 1973. And I came on board in December 1973 and went through the evolutionary process of a United States government agency, from the Office of Oil in the Gas to the Department of Interior over to the White House to the Federal Energy Office, the Federal Energy Administration to the U.S. Department of Energy. And then I left in September 1977 when you might say it was a full-fledged, fully matured federal agency. So that was a very interesting concept.

Then I went to Washington, D.C., because I was intrigued by the economic development dimensions of the government and the private sector. I went to work for the Ozarks Regional Planning and Economic Development Commission. It was one of the Title 5 agencies, sort of a small agency but parallel in structure to the Appalachian Regional Commission, to deal with areas or pockets of the United States where there was high unemployment, low per-capita income, low education levels and so forth. So in the Ozarks area, the Ozarks Mountain regions of Oklahoma, Arkansas, Missouri, Kansas and Louisiana — that broad five-state area — we were able to provide basic grants and supplemental grants to those local communities trying to uplift their local population through increasing employment, raising per-capita income and dealing with educational issues through (vocational) schools and so on and so forth.

In that period of time in Washington, I got exposure working on Capitol Hill as a program officer, going to the Capitol offices of the House and Senate, interchanging program information and the successes we were having and some of the assistance we might be needing.

At the end of the Carter administration it was determined that these Title 5 agencies would possibly not survive another round of authorizations and appropriations, so I decided it was time to maybe transition back to my hometown of Kansas City, Mo., where I wanted to get back to anyway. I was able to get on with the U.S. Small Business Administration in March 1980.

The SBA really gave me a complete opportunity to express my educational experiences and my professional experiences and sort of make an amalgamation of all my experiences to help American small businesses wherever I happened to be. That included Kansas City, Mo., where I dealt with Missouri, Kansas, Iowa, Nebraska, and also when I became a district director out in El Paso, Texas, and dealt with the folks in west Texas — everything west of the Pecos (River) plus Loving County. And then I went back to Kansas City as a deputy regional administrator for a brief period of time in ’94-95. And then I came out here in ’95 to deal with Nevada issues.

What’s your role in the Nevada office?

It’s as a district director to provide guidance, oversight, planning, direction, organization and control functions for the U.S. Small Business Administration in Southern Nevada and Northern Nevada, and to interact with the public, to interact with the media. We’re dues-paying members of 11 chambers of commerce and try to use them as a constructive vehicle for getting information out to their membership. It’s been very rewarding to have that relationship with the chambers.

Of course, we also work with the banks — we have about 50 banks that are listed in our resource guide. And we provide U.S. government loan guarantees to the public through those banks. So those are some of the functions that I perform.

Barack Obama was inaugurated a couple of months ago — how does a change in White House affect the local offices?

It affects the local offices in the sense that we are program people, and we are careerists. We’re not policy people, we don’t deal with the body politic, per se, we don’t form the policy, we implement policy as it’s defined through the programs and services that they either initiate as new programs or they modify existing programs.

Of course, that is somewhat controlled by the authorizing committees in the House and the Senate.

The U.S. Small Business Administration is unique, even though we’re a relatively small agency with only 2,200 people nationwide, we’re an independent agency, subcabinet level. Before the Bush administration, during the Clinton administration, we were on the Counsel of Economic Advisers and we were part of the president’s Cabinet. However, we were taken out of that role in the Bush administration and there have been arguments to restore us to that role because of the vital importance of the small business to the American economic system. So if we’re restored to that role, then we’ll have even more influence into those processes.

Is there a transition that goes on in this office with a change of administration?

It happens in somewhat of a disjointed fashion. There are no rules or regulations, no timeline for it. The president and vice president have usually either announced nominees for various Cabinet secretary positions before the inauguration or very soon after.

But since we are a subcabinet-level agency and administration, it’s up to the (senators) to determine when they want to exercise their authority for advice and consent to confirm the nominees of the president. And it’s up to them to determine what their schedule will be as to when they are going to set those hearings.

As of today (Feb. 25) we have not heard when those hearings will be so we don’t know when Karen Gordon Mills will have her hearings and be confirmed.

Flowing down from her will be a deputy administrator, a chief counsel for advocacy, there will be a national ombudsman dealing with regulatory issues, an inspector general, a general counsel, program directors of all the various programs. And many of these offices do not require Senate confirmation. It’s only the administrator, the deputy administrator and chief counsel for advocacy.

But there’s still sort of an irregular, unpredictable nature to the appointment to all the people that are below them. They will all be political appointees ... but flowing down from them will be the 10 regional administrators who will come on board, too.

I’ve seen in some administrations where a regional administrator might be appointed out of New York City for Region 2 and then it might be five or six months later when there is another regional administrator appointed for Region 5 in Chicago ...

(Once they’re all in place) they, being new to the process, typically gather us together and try to glean from us our historical knowledge about programs and services, what we’ve been doing, what we’re doing and where we think we’re going. And then they, in their interactions with political operatives back in D.C. sort through all that and turn right back around decide how they want to direct us and what they want to guide us to do.

So it’s not the smoothest process in the world, but it’s politics and I don’t think it’s any different in this country than in any other country in terms of that sort of irregular, unpredictable nature as to how things unfold after an election.

While all that is going on, what’s happening on the ground level? Are you continuing to work exactly as you were four months ago?

We continue on with our programs and services. We provide six basic functions: free counseling through our office and through resource partners like SCORE, the Small Business Development Center, the Women’s Business Center. We also provide low and moderate cost training through those same resource partners. And then we provide loan guarantees through the banks and the credit unions and the certified development companies. And then we provide government contract support through our procurement center representative. We have a representative that handles specialty contracting for socially and economically disadvantaged businesses in contracting with the federal government.

We also provide disaster support — we’re lucky in Nevada that we’re one of the least impacted by natural disasters. And then the last thing we provide is the office of advocacy — he’s an intervenor in court proceedings, he works with the congressional authorizing committees in Washington to make sure that the legislative acts that are passed have minimal to no adverse impacts on small businesses.

So those are the things we do and we just continue rolling on until they tell us we’re going to do things differently. And at that point we also go out and communicate that to the public and to the banks and others we work with through our programs.

It’s early yet, but have you gotten a sense of how this administration might differ in its approach to small business?

I think a couple of exciting dimensions of the new program initiatives, resulting from the stimulus bill that was recently passed by Congress and approved by the president, are the facts that we may be able to defer or reduce or even eliminate our loan guarantee fees in our 7a and 504 loan programs.

That is going to have very serious, very beneficial implications for America’s small businesses when they go to their banks and realize they can have their guarantee fees waived.

In some cases, these guarantee fees can amount to as much as $30,000 when you talk about a 3 percent fee on a million-dollar loan.

But also raising the guarantee percentage up to 90 percent on selected portions of our loan programs will have tremendous benefit, as well. Because that will provide more guarantee and more security for the banks and that increase guarantee portion will reduce their exposure and their capital requirements long term to provide this access to capital for small businesses.

What are your office’s top priorities going forward in 2009?

To ensure the American public and America’s small businesses that, indeed, the SBA is alive and well and lending through our participating banks, certified development companies and credit unions that credit is available. They need to contact a bank — the right bank, if you will, among the many banks with participating agreements — to make sure their capital access requirements are being met.

I think that if we can remain positive, remain future focused on the economic potential for our country — we’re a very positive people — and I think we need to persist in that future focus and optimism about tomorrow and the next day and next year, I think that we can find the bottom in this economic situation we’re in, and we’ll recover and move on as we always have in the 200-year history.

How do you define a small business?

SBA defines small business as 499 or fewer employees, independently owned and operated and not dominant in its field.

And that basically represents about 99 percent of the nearly 27 million businesses that are out there in America today. It’s the vast number of people that are out there. They’re our No. 1 employer, create more than 50 percent of our net new jobs, provide more than two-thirds of new technological innovations in American society.

They’re a very, very important aspect of our country. But like many other countries around the world, we seem to have a lack of true appreciation for what American small businesses actually provide to us on a day-to-day basis. We focus on the large box stores and the big industries when we talk about job layoffs and the like. But if every American small business could just employ one more person, it would virtually eliminate unemployment in this country.

What is the SBA and federal government doing to help small-business owners?

To help them directly ... it’s the elimination, deferral or temporary reduction of loan fees we think will have the greatest benefit to them.

A recent survey was conducted in which about 44 percent of small businesses surveyed said their No. 1 need was access to capital. We within SBA knew this perspective existed without that survey conducted.

Much of the attention has gone to the national and international money center banks — the larger banks that engage in worldwide commerce and their financial difficulties and the Troubled Asset Recovery Plan — TARP funds that were put into our economic system. What has been sort of ignored in this process is that some of our regional and community banks are still well situated, capitalwise, to continue to provide funding for America’s small businesses.

So if a bank can’t provide the service that you need as a small-business owner, then you need to possibly consider changing your banking relationship to a bank that’s more hospitable to your particular needs. So if you need to change your bank of record and go to a regional or community-based bank to meet those needs, then that’s where you need to go to keep your business thriving.

What is the SBA doing in Nevada to help small businesses?

Again, through the use of our six programs, we consistently provide ongoing free workshops to help fledgling businesses or new to the marketplace businesses begin the whole process of forming a small business, helping them with business plan development, helping them put together financial plans and helping them understand the implications of going into business. The ironic aspect of an economic downturn is that there are many people who will lose their jobs, but in losing their jobs they are still going to very actively seek the basics of life: food, clothing and shelter. And in doing so, some of the most creative spurts in the history of mankind happen in economic downturns as people seek opportunities for self-employment and, ultimately, the creation of a small business that provides jobs for other people.

Through our counseling programs and through our training programs that are on an ongoing basis through SCORE and through the Small Business Development Center and the Women’s Business Center and the Nevada Microenterprise Initiative we have those ongoing services out there to help people get into business and expand their business.

Do you think enough small-business people know about the SBA and what it offers?

That’s one of the most frustrating aspects of working for a United States government agency, or I would say any public service agency, in that in most cases we are not authorized nor are we provided appropriations for advertising and promotional dimensions of our ongoing programs and services.

It would be as though you were a large corporation, but you had no advertising budget. And how would Toyota or Microsoft or Ford or any other major corporation survive if they didn’t advertise and promote the fact that they’re out there and available to the American public? Since we don’t have that we have to rely on word-of-mouth advertising and being active members of chambers of commerce to get the word out and getting out on the street to tell the public about the programs we have available to them.

That’s probably the most difficult thing, to get people to understand that we are here, we’ve been here for 56 years and we have a lot of good programs and services for them.

Are there any specific programs you feel are underused?

I would say they need to understand the fundamentals of all our programs and services so they can avail themselves of them. When we consider the number of small businesses in the state as contrasted with the number of people that use our services, it’s really not that many who are doing that and we would like to see more people take advantage of our services.

Have the small-business lending programs been affected by the credit crunch?

Yes, we have seen an impact. Nationwide our 7a and 504 programs have been affected.

In 2007 we did 110,000 loans nationwide worth $20.6 billion. In 2008 it dropped to 78,000 loans for $18 billion and through Feb. 13, 2009, we’ve guaranteed 13,400 loans for $3.5 billion, so the trend has continued down.

We’ve seen the impact in Nevada as well. For 2007 we guaranteed 1,200 loans for $277 million, for 2008 we produced 758 loans for $209 million — again a decline. And for 2009 through Feb. 13 we’ve guaranteed 133 loans for $45 million.

So the trend has been down but I think that if people would continue to look to putting together good business plans and financial proposals and get them to the right banks, there are banks out there that are lending money. They have money available.

We can’t provide any real implied or expressed endorsement for any specific bank, because that’s not in the nature of what the federal government can do, but at the same time, if a person shops their proposal around to the various banks that we participate with I think they may well find a receptive banker out there if they have good financial records and a good plan to move forward.

And the SBA can provide counseling to help people get their financial proposals in order before talking to those bankers, right?

Absolutely, we have them both at SCORE and at the Nevada Small Business Development Center (www.scorelv.org and www.nsbdc.org).

Have you seen a change in demand for your office’s services amid the economic downturn?

I haven’t had a chance to talk to the Nevada Small Business Development Center, but in my discussions with SCORE they haven’t noticed a significant uptick in the number of people coming to their workshops yet.

I told them that we would anticipate seeing more of that around late spring, early summer when the full impact of this downturn is felt.

We have so many economic indicators we all monitor and one of the most prominent that gets the most publicity is the stock market. But it tends to be a leading economic indicator in a down cycle. So right now we’re seeing that.

But the unemployment figures, if they continue on their ascendancy as we’ve seen of late, I think we’ll see more people seeking self-employment opportunities and coming to the workshops.

If you could ask for anything from the incoming Small Business administrator or the Obama administration, what would it be?

A slight augmentation of our staff and budget to enable us to more effectively reach out to the Nevada small-business community, to move more freely out and about throughout the state of Nevada, to meet not only in urban centers but in suburbia as well as in the rural and isolated centers. We have a vast state, it’s the seventh largest geographically, but since the federal government owns most of the land the major population concentrations are in the Reno/Carson City area and the Las Vegas/Laughlin/Mesquite/Pahrump/Boulder City/Henderson area and in the Ely/Elko area. There’s a lot of terrain between those.

To get out and about and meet with all the people we think should benefit from our programs we need to be out there. And I think if I had an additional staffer or two and a few extra dollars, we could do a much better job in doing that. So that’s what I’m looking for.

Also I would like to find our bankers more active promoters of their relationship with SBA, to share with the consuming public out there and the people who borrow money from them that they are full fledged partners with the U.S. Small Business Administration in not only creating jobs, but in creating businesses and expanding businesses, as well. If they could do that with some of their advertising dollars, I think it would be a real benefit. The multiplier effect would come into play and the American public would hear more about the SBA and our programs and services.