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STRATEGY

How to fix the SBA

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Now is a pivotal moment for the SBA. A new administrator has been nominated, and Congress is at the beginning of the reauthorization process of the SBA's finance, entrepreneurial development, government contracting, and disaster recovery programs. I hope reauthorization will lead to a renewed SBA that is dedicated to fostering small-business ownership in America. To achieve this, I have introduced three bills that will do the following:

  1. Increase the maximum amount a business can borrow under the 7(a) program to $3 million, with 75 percent guaranteed, up from $2 million, to reflect rising property and operating costs.

  2. Reject new fees. To pay for $7 million in administrative costs, the SBA has proposed a fee increase on small businesses. Though it's a small amount, this is not the way to balance the budget.

  3. Reduce paperwork for 7(a) lenders. Currently, lending institutions must complete 71 separate applications, one for each SBA lending district, in order to participate nationwide. A uniform national application would be preferable.

  4. Simplify eligibility requirements. A small business's eligibility to receive a loan is determined by a confusing multipage chart that has different size standards for every industry. We should authorize the SBA to create a new standard that simply looks at gross proceeds to judge whether a business qualifies.

  5. Reform and enhance the Small Business Investment Company program. SBICs use their own capital, combined with funds borrowed from other private investors and supported by an SBA guarantee, to make equity and debt investments in qualifying small businesses. The program has been a model for similar public-private partnerships around the world. But the administration stopped issuing new financing under the program at the end of fiscal year 2004, because the program showed a loss. Congress should create a new SBIC program that would increase the government's share of SBIC profits to mitigate future risk.

  6. Rename the 504 loan program the Local Development Business Loan program to signal to potential borrowers that the statutory purpose of the program is to create new jobs and strengthen local development in communities around the country.  

  7. Preserve the Microloan program. This inexpensive program, which the Bush administration has proposed eliminating, provides loans of up to $35,000 and technical assistance to new and growing small businesses. In my own state, Maine, almost 90 loans have been made in the program since 2004, for a total of more than $1 million, to businesses that could not get any other financing.

The SBA's programs demonstrate how Congress can play a positive role in enhancing private-sector financing for start-up companies. SBA loan and investment programs have produced success story after success story, which include assisting the founders of Intel, Staples, and Federal Express, as well as thousands of other successful businesses. My plan will build upon these past successes and make the SBA even more effective.  

Olympia J. Snowe, a Republican, is the senior senator from Maine.

Last updated: Jun 1, 2006




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