More with less: like a lot of the small businesses he serves, U.S. Small Business Administration chief Hector V. Barreto has had to eke more services out of a smaller budget, a task he's accomplished by drawing on his own experience as a small business owner and as former head of the Latin Business Association.

Four years ago Hector V. Barreto went from running a $3 million insurance business in Glendale to overseeing a $600 million federal agency that serves 25 million small businesses across the country.

In that time, the SBA has doubled the loans it guarantees and the businesses it has trained. The agency has developed a new lending program that allows businesses to borrow smaller amounts of money more consistent with the needs of the community and it has streamlined the process by which small businesses can get their fair share of federal contract business.

Drawing on his own background as a small businessman and his experiences heading up the Latin Business Association, Barreto has also created a number of new networking programs to put companies together with Fortune 500 companies and other potential buyers of goods and services from small businesses. One such program, Business Matchmaking, scheduled to take place June 7 and 8 in Pasadena, promises to be the largest yet, with 4,000 pre-qualified appointments expected to take place.

The SBA budget, over $850 million when Barreto was appointed, has since been slashed to about $600 million, and is likely to remain at that level in the coming fiscal year as well. But the increased lending volume, coupled with increased operating efficiencies and improvements in default rates, has enabled the agency's work to be self-supporting, eliminating the need for about $100 million in federal appropriations, Barreto said.

Question: What has the SBA accomplished so far during your tenure?

Answer: In the last four years the SBA has doubled the dollars we guarantee and the number of loans we do. We've also increased the amount of people we train by a factor of a million more (last year) and we are facilitating more contract opportunities than ever in the history of government. Last year for example the federal government bought $65.5 billion worth of goods and services from small businesses, about 24 percent of everything the government bought. This year we're on pace to break every record that we broke last year so it's been a very exciting time.

Q: Can yon give us some examples of the increases you mentioned?

A: For example last year we trained 2.5 million small businesses. The year before that we did 1.5 million. When I first started we were doing about 50,000 loans. This year we'll do over 100,000 loans. That year when I started we were guaranteeing about $10 billion, $11 billion worth of loans. This year we'll guarantee over $20 billion worth of loans.

Q: How has the small business climate changed over that time?

A: What the president focused on from the very beginning is a very comprehensive small business agenda. One was additional tax relief for small businesses. We were able to benefit over 25 million small businesses in the U.S. and put about $75 billion back in their pocket. We also really incented them by quadrupling the business deduction from $25,000 to $100,000. We realized there were still a lot of small businesses that were unsure about the prospects for the economy and they weren't buying technology or vehicles or restocking inventories. So when we quadrupled that business deduction we started seeing those purchases go up and that's what helped move the economy forward.

We've done a lot of work with regards to regulatory reform. We got health savings accounts passed a little over a year ago. There's something else we're working on--association health plans that allow small businesses to pool together across state lines and create a larger purchasing pool to negotiate better rates and better benefits with the health insurance carriers.

Q: A study just released by your agency said that in 2000 small business manufacturers incurred two-and one-half times the burden of regulatory costs that firms with 500 or more employees incur. Has that situation improved?

A: I think it is improving. We've been measuring savings since the beginning of the administration, and it's in excess of $40 billion that we've been able to save small businesses. One of the things (the study) shows you is how great the problem is. $40 billion is a great number but when small businesses are spending hundreds of billions of dollars nationwide we still have more work to do. One of the things the Office of Advocacy does is they deal with proposed regulations before they go into effect. We go back to the federal agencies and say before you put a new regulation in place you need to do an impact study on how that's going to affect small businesses. This is somewhat of a new concept.

Q: The fees to borrowers have recently increased. How has that affected your lending?

A: Well we didn't raise the fees to borrowers. The fees had been pretty consistent and then when 9/11 happened Congress passed two-year legislation that lowered the fees on the lenders temporarily. That was to motivate lenders to make loans to small businesses after 9/11. The legislation expired after last year so the fees went back to the earlier levels.

Q: How have the types of loans changed?

A: When I first came on board the average size loan was $250,000. Most small businesses would say, 'I can't qualify for a quarter of a million dollars, I don't need a quarter of a million dollars. I need $10,000. I need $20,000.' Fifty percent of our loans now are under $350,000, and last year we did 24,000 loans under $35,000. Our average loan size now is $100,000.

The other thing is we weren't doing a lot of loans in the emerging markets. Last year one third of our loans went to minorities. This year so far we're up 15 percent to Asians and Hispanics. I'm up 50 percent to African Americans and 50 percent to women.

Q: How have you been able to move banks to smaller loans?

A: One of the big initiatives was a program called the SBA Express Loan; those are loans up to $300,000. That now is 50 percent of my portfolio. We simplified underwriting. I allow the banks to make their own decisions on those loans. They don't have to come back to me. They can use their own forms. They don't have to use an SBA form. They can transmit the information to me electronically. I centralized the processing of those loans so we can turn them around a lot more quickly. Nobody ever did these things before.

Q: The micro-loan program has been very effective in the San Fernando Valley. Why is it going to be eliminated?

A: We haven't asked for money for that program. We didn't ask for it last year either and the appropriations committee decided to give it to us. We don't feel that we are very effective at doing that program. There are 25 million small businesses, and I did 2,400 of those loans. When we analyzed how much it costs us to deliver that loan program, it cost us $1 for every $1 we were able to lend. At the same time we started doing many more of those small loans in our flagship SBA Express program and it cost us a fraction of that.

Hector U. Barreto

Title: Administrator, U.S. Small Business Administration

Age: 44, Birthplace: Kansas City, Mo.

Education: Bachelor of science from Rockhurst University, Kansas City

Personal: Married, three children

Career Turning Point: "When I decided to move to California."

Most Admired Person: Father, the late Hector Barreto Sr., a founder of the U.S. Chamber of Commerce.