Partners, Volume 15, Number 2, 2005

Louisiana SBA Chief Stages Turnaround

An Interview with Eugene Cornelius Jr., District Director, U.S. Small Business Administration, Louisiana District Office

Louisiana recently claimed the highest ranking in the country among middle-size offices in the Small Business Administration (SBA), and the number-two ranking overall. A little over a year ago Louisiana came in dead last. Enter Eugene Cornelius, Jr. who took over the Louisiana District office in April 2004. With energy, enthusiasm, and vision Cornelius led the Louisiana team from worst to first in one short year. We spoke with Mr. Cornelius to discuss the turnaround.

Partners: How are the offices evaluated? Is the ranking based on loan volume alone?

Cornelius: No, actually it’s not based on just one or two characteristics. The offices are evaluated on the number of loans, the number of loans to targeted communities, and the number of loans to women, minorities, veterans, international, and rural communities. Not only do they look at whether the volume has a high percentage of loans in a targeted community, but at whether we’ve succeeded in the number of loans being made to African-Americans and Hispanics within that targeted community.

Partners: Did you do anything different to target the minority community for small business lending?

Cornelius: Well, I targeted the business community at large as part of an effort to increase Louisiana’s economic development across the state. It just so happens that in casting the net across the state and the business community in general we caught the largest group of small businesses—minority-owned businesses.

Partners: What was your initial overall assessment of the Louisiana district as it relates to small business development and expansion?

Cornelius: I found a staff that was ready to assist me in whatever way I needed. The staff here has a wealth of knowledge and expertise. I found that the issue was how to manage our resources. Management needed to step out of the way and let the staff do their jobs.

I also found that the banking community was very conservative. I felt that I had walked backwards in time! But then I got to know them and discovered that the SBA was not being a genuine partner and was making it difficult to do business. I listened to them and tried to understand what their needs were, what could I do within SBA’s rules and regulations to meet their needs and make it easier to do business.

Partners: So after meeting with the bankers and uncovering their needs, what changed?

Cornelius: Educating new bankers about the new ways of doing business. I assessed the business community that was involved in trade and found that most of them were not ready for traditional banking. They didn’t have the documentation necessary for traditional lending. I discovered a special niche for loans that were less than $50,000, and that these loans were not cost-effective for the traditional banks to pursue because of the amount of documentation required. We had a real gap. That’s when I began offering the “Community Express” low documentation loans that are not conventional and are under $50,000. Since the local banks found the loans too expensive, I brought in outside banks to do the $50,000 and under loans. They’ve figured out how to do these loans in a cost-effective manner.

Were the local banks mad? No! They saw this as a way to develop excellent candidates for traditional banking in the future. They also understood my long-range plans of lending small amounts to build the business community for conventional banking. They were comfortable leaving this lending to the experts. For example, an innovative bank has figured out how to do the business loan express product in a cost-efficient way. By bringing them in, the overall [small business] market is higher. We’ve made 700 loans with them in one year.

Partners: What were your strategies for increasing the small business lending volume?

Cornelius: I realized that small businesses know what they do well, and they do it well! But they don’t have the business acumen to be able to get capital. So rather than concentrating on teaching the banks how to do small-business lending, I focused on educating businesses about how to get more capital, how to be prepared to go to the bank for a loan.

Partners: We have had 12 small business development centers statewide. [Cornelius interrupts here to count 13, if you include the international trade development center.] So what’s different now?

Cornelius: The SBDC’s are funded by the SBA, so I set forth expectations for a certain quality of service. I changed the evaluation process—instead of looking at what the market is, how many businesses do we have to reach, say 500 or so, I took a look at what the overall small business market was and set a goal of serving 10 percent of that market, and of the 10 percent, one-third of those businesses will be minority businesses. I put a special emphasis on increasing our numbers in rural communities. We’ve increased our impact on rural communities by 200 percent.

Partners: So I’ve heard about many of the approaches you’ve taken to get your team where you are. Let me summarize a few: you’ve stepped out of the way so that your staff can do their jobs, you’ve increased outreach into the business and banking community, you’ve put emphasis on teaching people how to access capital, you’ve brought in lenders who can make the small loans, and you hold people accountable for goals. What other factors can you say have contributed to the increase in lending?

Cornelius: I think that the biggest contributor is outreach to the business community. I listened to what they had to say. I didn’t go in there telling them that this is the government, and this is what we have to offer, and we’re here to solve your problems. If I found a problem that the SBA couldn’t fix, I’d find someone who could, even if it was my “so-called” competitors—the USDA, the Louisiana Department of Economic Development. The SBA is not for everyone; it’s about solving problems and everyone working together to get the business what it needs. I don’t care who does it, let’s just make it happen!

Partners: Where can traditional financial institutions have the most impact on increasing small business lending?

Cornelius: If this community can recognize that the largest number of growing businesses across the country are women- and minority-owned businesses, that’s where the money is and they need to get to it! It’s that simple. They’re missing opportunities to make money. We need to roll up our sleeves, get over it and get into it—make some money!

Partners: What future trends do you foresee?

Cornelius: I believe it’s an exciting time for us. People ask me where I get my energy from and it’s because of this excitement. There’s a migration of people to the South, and perhaps for the first time in Louisiana history I see the governor, the mayors and senators all working together on economic development. Seeing senators of different parties working together, this is where I get my excitement, my adrenaline! I don’t think that we’ll recognize Louisiana two or three years from now.

Eugene Cornelius became the District Director for the Louisiana Office of the U.S. Small Business Administration (SBA) in April 2004. As district director, Cornelius is responsible for the administration and implementation of the Agency’s various lending, contracting, and technical assistance programs in support of small business throughout the state of Louisiana.

Interview was conducted by Nancy Montoya, regional community development manager in the Atlanta Fed’s New Orleans branch.

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