By Oliver Connery

While politicians frequently cite small businesses as the driver of innovation, economic growth, and job creation, funding for the 18 Small Business Development Centers (SBDC) in Pennsylvania was cut by 45 percent in the 2009-2010 PA state budget.

SBDCs offer free business consulting services and educational programs for new, inexperienced entrepreneurs and established small businesses. The Penn State SBDC serves Centre and Mifflin counties from its Innovation Park and Lewistown locations.

The Penn State SBDC has helped local entrepreneurs like Morley and Scott Wong of the Green Bowl, David Hellyer of Comfort Keepers, and Piezo Resonance with advice on accounting, business plan writing, and negotiating loans with banks. They even helped Rainbow Music with expanding their store and inventory.

The importance of new small businesses cannot be understated. Sixty to eighty percent of new jobs are created by small businesses that have 1-500 employees, according to the national SBDC website. These small businesses employ half of all employees, pay 44.7 percent of all payroll, and provide for 50 percent of the GDP.

In addition, they funnel the money they make back to other businesses by buying from others. They account for 74 percent of goods and services (including loans) purchased from the banking industry, 70.8 percent of the real estate market, and 65.3 percent of the advertising/promotion market, according to Entrepreneur Magazine.

Starting a small business is not easy. One-third of small businesses fail in their first two years, and after four to six years, sixty percent of small businesses will fail, according to figures from the Small Business Administration (SBA). The average lifespan is ten years, not only because of failure but because they finally break even, single owners lose interest, retire, get bought out and cannot or will not pass the business on.

Furthermore, many small businesses operate on small margins, which leave them vulnerable to market fluctuations. The SBA recently found that states with high unemployment see a higher rate of business start-ups, particularly “non-employer firms,” as people laid off from their jobs attempt to work for themselves, but don’t hire any other employees.

SBDCs are funded at local, state, and federal levels. The federal government currently supports the development of small businesses by providing matching funding for SBDCs through the SBA. The SBA then partners with universities and state and local governments to set up offices of the SBDC. They also partner with state agencies, such as the PA Department of Community and Economic Development, other governmental institutions like the Defense Logistics Agency, and non-governmental institutions like Ben Franklin Technology Partners or the Life Science Greenhouse Fund to work with local chambers of commerce, development corporations and other faith-based and neighbor partners. Acting as a network, these organizations help create support for a continual flow of emergent small businesses.

Small businesses that receive assistance from the SBDC and similar organizations succeed at rates as high as 87% through the sixth year, almost double the expected rate, according to the National Business Incubator Program.

“The center helps both the new entrepreneur and the banks analyze the efforts of the owner in the new business and whether it is feasible to develop the business into a viable revenue generator,” said Linda Feltman, Senior Businesses Analyst of SBDC.

The Director of SBDC, Heather Fennessey noted that although they don’t keep track of the local success and failure rates, Center County small businesses do follow national trends. Fennessey said that under the current economic conditions they have not seen a reduction in the numbers of small businesses served, but they have noticed a shift in the types of businesses served.

Feltman confirmed they are seeing a shift from mid-size (20-50 employees) businesses to smaller low-size businesses (0-5 employees).

When budgets are tight or there is an increase in political pressure to cut government spending, funding for services like the SBDC often suffer. But the SBA’s budget was already cut over 40% between 2001 and 2009. Although the federal government has not yet cut their funding again, the SBDC relies on matching funding from all the partners involved to sustain its support.