Friday, November 20, 2009

Small Businesses: Goldman Sachs Wants You to Grow Up to Be (Sort of) Big and Strong

Small business owners - rejoice.  Goldman Sachs wants to give you money (sort of).

In a fit of public relations awareness social consciousness, Goldman has launched its 10,000 Small Businesses  initiative, hard on the heels of its 10,000 Women initiative.  Let's call it 10KSB.  (Is it coincidence or irony that the most obvious acronym for this program looks like 10-KSB, the annual securities report required of small business issuers?)

Through 10KSB, the megafirm intends to funnel $500 million out to the nation's small businesses.  The money will flow through  community colleges and universities, Community Development Financial Institutions (CDFIs), and other program partners, through a combination of education and business support services, loans, grants, and investments.

10KSB is not for the freshly minted.  If you've just started a home business, or your purely and truly and utterly unique idea for a store is just a gleam in your eye, you won't sniff this money.  According to Goldman's website, the general guidelines for qualifying small businesses are:
  • Business revenues between $150,000 and $4M in most recent fiscal year
  • At least four full-time employees
  • Business operations for at least two years
  • Business model that could scale to create more jobs
  • Predominantly in underserved markets
In other words, if you've made it to two years, actually have a few employees and a scalable business - i.e., you're already over the hardest new business hump, and you might someday grow large enough to be a Goldman client - you may be able to tap into 10KSB resource.

Blogger Kenneth Anderson, a Volokh Conspiracy contributor and Goldman fan and stockholder, argues that the program is underfunded and a ham-fisted political ploy - a sop to the Obama Administration's love for community development programs (see Goldman Sachs and Its Small Business Fund Ploy).  About the money:  Whether it is a lot or not depends on your perspective.  $500 million is 15% of Goldman's net profits for its most recent quarter, although it's only 3% of the amount reportedly set aside by Goldman so far this year for compensation.  But I think the interesting figure is 10% - $500 million being 10% of Warren Buffett's reported investment in the firm a year ago ($5 billion for preferred stock).  Buffett's one of three heads of the advisory council for this initiative.  If anything, the program sounds like a tithe to the needy made at Buffett's insistance.  

Even if you look at it as a positive development, it's an achingly awkward one.  These days, watching an investment bank/financial behemoth give away - or even lend - some of its hard earned money to "small business" (you can almost hear Goldman execs choke when they try to say those two words together) is a bit like watching your six year old as he tremblingly puts his first allowance earnings into a jar for safekeeping and then stares at it for hours as if wondering if he's made a mistake - you're proud of him but you think to yourself, "Jeez, was that so hard?"

You know, someone at the firm must be in charge of this program.  I can't help but wonder what that kind of job would be like at a place like Goldman.  Possibly very cool.  Possibly mind-blowingly weird.  

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