Capitol venture | Karen Gordon Mills of Maine leads the SBA as Obama charges the agency with aiding economic revival

Karen Gordon Mills looks slightly out of place as she tours Alcom Inc., an aluminum trailer manufacturer in Waterville. She click-clacks her patent leather high heels across the concrete floor as welders join aluminum frames together in bursts of glowing blue light. All eyes are on Mills and her entourage of aides and local business development types as they wind through the factory, listening to Alcom President Trapper Clark talk about how a $1.1 million SBA loan guarantee is helping to fund his company’s move to an expanded 70,000-square-foot manufacturing facility.

The August stop was the second part of Mills’ two-day visit in Maine, her first public appearance in the state as top dog of the Small Business Administration. Mills had been confirmed just months prior to the dully-titled but high-profile position of SBA “administrator,” tasked with heading up the nation’s only federal agency devoted solely to supporting small businesses. Day one of her visit in Maine was spent in Portland and Bangor, participating in hearings with Sen. Olympia Snowe on the deployment of federal stimulus dollars to small businesses. Already well-known in the state for her work in venture capital and promotion of economic growth clusters, Mills now faced the state’s business community not as a member, but as a bureaucrat.

The entourage that buzzes around Mills only adds to her Washingtonian aura. But as she tours the Alcom factory, she eases away from the crowd to speak with Clark over the industrial din and murmurs of Kenny Wayne Shepherd’s “Blue on Black” playing in the background. Mills asks about the retail price of a motorcycle trailer and the company’s competitors. She jokes that she could start a “little SBA on the road” in one of Alcom’s snowmobile trailers. Then she questions Clark about how he learned of the SBA loan program funding his company’s expansion. She listens intently as he explains that Alcom expects to nearly triple both its employees, to 194, and its revenues, to $40 million, over the next five years. “It’s exactly who we want to be supporting right now,” she says.

Just who the SBA should support and how has been the subject of debate nearly since the administration was founded in 1953. Mills takes the helm as President Obama charges the SBA with reviving small businesses, which employ more than half of the country’s beleaguered work force, to aid the nation’s economic recovery. Many believe that Mills’ ties to a state like Maine, where 90% of businesses employ fewer than 20 people, bodes well for her leadership of the administration, and that her skyrocketing profile will shine some light on the state. But restoring faith in an agency that in recent years has suffered drastic budget cuts and accusations of mismanagement will prove no small feat for Karen Gordon Mills.

Setting an agenda

Among Mills’ top priorities in her new role is customizing the agency to respond to small businesses’ varying financial needs. In what she calls the “next evolution of capital,” the SBA is considering a number of concepts to differentiate Main Street businesses like car repair shops and restaurants from high-impact businesses experiencing more rapid growth.

Mills sits down in a cramped office at Alcom to discuss her plans for the administration. “We have made it our mission to be accessible to small businesses,” she says. “We need to provide important oversight of taxpayers’ money and we work very hard to oversee lenders and our products to make sure that we are mitigating our risk. But that said, we also need to make sure that we give small businesses the help that they need through the right loan products.”

The SBA is working with other agencies, including the commerce and energy departments, to ensure small businesses have access to new technology and programs throughout the federal government, Mills says. Such breaking down of silos echoes Mills’ earlier work in another area — economic cluster development.

Mills’ profile in the state jumped significantly in 2007, when she was appointed by Gov. John Baldacci to chair his Council on Competitiveness and the Economy and implement recommendations from the landmark Charting Maine’s Future study. Her name became inseparable from discussions on clusters — geographically concentrated businesses, educational institutions and other entities within complementary industries — because of her personal support for them and her authorship of an April 2008 Brookings Institution report titled “Clusters and Competitiveness: A New Federal Role for Stimulating Regional Economies.” Her work on behalf of clusters was integral to the passage of a $50 million research and development bond to spur innovation by small businesses. The boatbuilding industry in particular has benefitted from her efforts.

“That’s a lesson that I’ve actually been able now to take across the country in my new role,” Mills says. Just weeks prior, Mills and her team had witnessed the linking of robotics and automotive industries in Michigan. “This is a win-win for these small businesses,” she says.

Mills’ sphere of influence in Maine draws on her involvement in a number of business and economic policy involvements. She founded private equity firm MMP Group in Brunswick, where her husband, Barry Mills, is president of Bowdoin College. The couple has three sons.

Born and raised in Massachusetts, Mills after college worked for prestigious management consulting firm McKinsey & Co. She later served as a director at Scotts Miracle-Gro and Arrow Electronics. In 1999, Mills teamed up with a group of women to start Solera Capital, a New York venture capital firm that invests in organic food, health care and publishing companies. She was unanimously confirmed as Obama’s pick for the SBA administrator position in April.

Mills, 55, shares some common roots with Obama. She, too, is a graduate of Harvard University, with a degree in economics and an MBA. Her parents, Melvin and Ellen Gordon, are CEO and president, respectively, of the Chicago-based Tootsie Roll Industries. In nominating her for the administrator position, President Obama spoke of her real-world expertise. “With Karen Mills at the helm, America’s small businesses will have a partner in Washington to create jobs and spur growth,” Obama said. “As a venture capitalist who invests in small businesses, Karen understands the challenges faced by both small business owners and the workers they employ.”

Among those challenges is completing the often cumbersome eligibility requirements for SBA programs. Mills pledges to improve turnaround times on loan packages — which are already down to an average five to 10 days, she says — improve accessibility to government contracts and put more information online for small business owners. “We need to give them all the tools that we can give them in as efficient a manner as possible,” she says.

But the paperwork pales in comparison to what Mills identifies as the “number one concern” for small business owners today: health care. Calling the current situation “untenable,” she’s adamant that if small businesses are going to help lead us out of the recession, some resolution on health care is critical. “They want to provide it, they just don’t have access,” Mills says of small business owners.

As Maine goes

While the SBA has been tapped to help fuel the nation’s economic recovery, it actually serves only a small fraction of the country’s small businesses. The administration’s guaranteed loans — its bread and butter — make up only about 6% of all small business lending each year in the United States, based on data compiled by the SBA and its Office of Advocacy. Federal contracting to small businesses, which the SBA is charged with increasing, totaled about $94 billion last year, less than 1% of all small business revenues.

The U.S. Treasury committed $15 billion earlier this year to unfreeze lending markets, and as part of that effort the SBA temporarily eliminated some loan fees and increased guarantees on some 7(a) loans to 90%.

As of this summer, SBA loan dollar volume was up 45% in the core 7(a) and 504 programs to $6.9 billion. The secondary market is picking up, and the SBA is working to help small businesses through the temporary ARC loan program, which provides no-interest, deferred repayment loans of up to $45,000. As of July, the SBA had approved more than 700 ARC loans totaling $22.8 million. Two new programs instituted under the recovery act call for expanding 7(a) eligibility to more than 70,000 small business, and offering inventory financing for car, recreational vehicle, boat and other dealerships under the new Dealer Floor Plan Financing pilot program.

More work remains to be done, particularly in the area of the SBA’s disaster preparedness, which earned a black eye after Hurricane Katrina. A July report from the Government Accountability Office found that future recovery efforts could be hampered by the agency’s failure to implement congressional requirements for disaster preparation. Among the shortcomings were that the SBA failed to implement a required program to speed loans to small businesses and smooth private small businesses lending after a natural disaster.

Mills’ office is working on that. It’s also “reviewing options” for better tracking the long-term performance of businesses that participate in SBA programs. The administration supplies reams of data on its loan portfolio, but only anecdotal information about how the businesses it helps perform down the road, in terms of employment figures, revenues and other measures. While the SBA is looking for ways to better understand and assess this angle, nothing is currently under way.

These are issues of national scope, and it remains to be seen how Mills’ appointment will affect Maine. As in other states, Maine’s small businesses depend on access to new markets and federal contracts, something Mills knows well from her time here, according to Jim McConnon, an economics professor at the University of Maine. “The visibility of having someone from Maine at the helm of the SBA is positive,” he says. “She has to manage an organization that has to help businesses all over the country. If she continues to move forward, Maine will benefit like everyone else.”

As of July 31, Maine saw $55.6 million in 7(a), 504 and microloans through the SBA, with major lenders including Machias Savings Bank, Merrill Merchants Bank and Camden National Bank. According to the SBA’s Office of Advocacy, the small businesses these banks and the SBA are funding create more than a whopping 90% of the state’s new jobs.

Mills has been exposed in Maine firsthand to numbers like these and the faces behind them. While she surely has plenty more to learn on the national stage, her background, particularly in venture capital, provides the SBA with a unique perspective, says Eloise Vitelli, director of program and policy and the Centers for Women, Work and Community. “She’s been exposed to what small business means in a state like Maine,” Vitelli says. “I think it’s nothing but good news for Maine.”

Jackie Farwell, Mainebiz staff reporter, can be reached at jfarwell@mainebiz.biz.