Small Business issues have been a concern in the United States since early in the 20th century. The Reconstruction Finance Corporation (RFC), created by President Herbert Hoover in 1932 to alleviate the financial crisis of the Great Depression, was basically a federal lending program for all businesses hurt by the Depression, large and small. It was adopted as the personal project of Hoover's successor, President Franklin D. Roosevelt, and was staffed by some of Roosevelt's most capable and dedicated workers.
Concern for small business intensified during World War II, when large industries beefed up production to accommodate wartime defense contracts and smaller businesses were left unable to compete. To help small business participate in war production and give them financial viability, Congress created the Smaller War Plants Corporation (SWPC) in 1942. The SWPC provided direct loans to private entrepreneurs, encouraged large financial institutions to make credit available to small enterprises, and advocated small business interests to federal procurement agencies and big businesses.
The SWPC was dissolved after the war, and its lending and contract powers were handed over to the RFC. At this time, the Office of Small Business (OSB) in the Department of Commerce also assumed some responsibilities that were primarily educational. Believing that a lack of information and expertise was the main cause of small business failure, the OSB produced brochures and conducted management counseling for individual entrepreneurs.
Congress created another wartime organization to handle small business concerns during the Korean War, this time called the Small Defense Plants Administration (SDPA). Its functions were similar to those of the SWPC, except that ultimate lending authority was retained by the RFC. The SDPA certified small businesses to the RFC when it had determined the businesses to be competent to perform the work of government contracts.
By 1952, a move was on to abolish the RFC. To continue the important functions of the earlier agencies, President Dwight Eisenhower proposed creation of a new small business agency -- the Small Business Administration (SBA).
In the Small Business Act (Act) of July 30, 1953, Congress created the Small Business Administration (SBA), whose function was to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns." The charter also stipulated that the SBA would ensure small businesses a "fair proportion" of government contracts and sales of surplus property.
The Act also stipulated that the definition of what constitutes a small business should vary from industry to industry to reflect industry differences accurately. It charged the SBA with establishing the small business size standards, industry by industry. This numerical definition is what is commonly considered the standard for establishing whether a business is considered small. Another stipulation of the act is that to be considered a small business concern, it must be one that is independently owned and operated and is not dominant in its field of operation.
All federal agencies use the SBA's size standards to determine the eligibility of firms to receive federal government contracts that are specifically designated for small business. Other federal and state laws and/or programs may similarly require using SBA's small business definition.
