Washington Insiders Express Criticism, Cautious Optimism Over SBA Nominee

Among the many services offered by The ServiceMaster, a Downers Grove, Ill.-based lawn-care company, one in particular sticks out — disaster response.

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With the company's 45-year-old executive vice president, Steven Preston, set to take the reins of the Small Business Administration — an agency that has taken heat for its handling of recovery efforts in the Gulf Coast, among other shortcomings — many Beltway insiders say managing a growing backlog of disaster loans will likely become his full-time job.

To date, the SBA has received some 407,500 applications for low-interest recovery and rebuilding loans from individuals and small businesses since Hurricane Katrina struck in August 2005, agency figures show. It has approved just 121,300 of those, worth a total of about $8 billion.

"He seems like an operations and processes guy, and that's important given what the agency is focusing on now," Karen Kerrigan, president of the Small Business and Entrepreneurship Council, said about Preston.

Still, like many Washington-area officials contacted by Inc.com, Kerrigan had never heard of Preston before Tuesday, when the White House quietly announced his nomination to replace outgoing SBA Administrator Hector Barreto. Unlike Barreto, Preston does not have experience running a small business — a fact that has raised at least a few eyebrows in entrepreneurship circles.

The nomination is subject to Senate approval.

"The buzz I'm hearing around town is he's a relatively unknown choice, but an interesting one," said Andrew Sherman, a partner at Dickstein Shapiro Morin and Oshinsky who focuses on legal issues for small businesses. "It will be interesting to see how the nomination hearing goes."

At ServiceMaster, a company with more than 5,000 locations and 40,000 employees spread across the nation, Preston oversaw strategic planning, mergers, and acquisitions for the company's Strategic Services division. There, he had direct authority over some 250 workers and a budget of $30 million, according to his resume.

He also served as the company's chief financial officer from 1997 to 2003, where he enabled funding of some $2 billion in acquisitions, among other initiatives.

In the early 1990s, he served as senior vice president and treasurer at First Data Corporation, where he created a $1.2 billion hedging program. Ten years earlier, he spent time as an investment banker at the Lehman Brothers.

By contrast, Barreto helped manage his family’s restaurant, and later an import/export company and construction firm.

With the ongoing Katrina loan problems, however, Preston "has a tremendous background and brings an impressive financial portfolio to the position," said Terry Neese, co-founder and past president of Women Impacting Public Policy, a bipartisan group that promotes the interests of women-owned business.

"With what’s been happening after Katrina, we hope his approach will be much more beneficial, not only for small businesses in the Gulf, but also nationally," Neese said.

Still, others expressed concerned Preston's strong corporate credentials might have put him out of touch with the needs of smaller business owners.

"Ideally, who you really want in that position is an entrepreneur who has built a small business into a larger business and than moved on," said Rob Atkinson, who recently founded the Information Technology and Innovation Foundation, a policy think tank.

Rep. Nydia Velazquez (D-N.Y.), the ranking member on the House Small Business Committee, put it more bluntly, saying in a statement Wednesday that Preston was "coming to the agency from a Fortune 500 company whose issues are nothing like those faced by the average small business owner."

Velazquez, an outspoken critic of the SBA under Barreto, said she looked forward to hearing how Preston planned to address a number of issues, including the agency's contracting system, which has routinely missed federal targets for contracts to women- and minority-owned businesses in recent years.

Others also cited concerns that Preston lacks any political experience. "If he's coming from the private sector, he has to come with realistic expectations," Kerrigan said. "There are restrictions on a lot of what you can do with the federal bureaucracy."

But in Sherman’s view, that could play in Preston’s favor. "He was chosen outside the beltway," Sherman said, adding that instead of politics, Preston has spent much of the past decade overseeing a large franchise network of entrepreneurs and small business people. "It's a savvy choice."

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