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Bush to SBA: Make Do with Less

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Jan. 14, 2005 -- To hear him speak, it seems as if President Bush is counting on entrepreneurs to rally the nation's economy. "To make our economy stronger and competitive, America must reward, not punish the efforts and dreams of entrepreneurs," he said in his State of the Union speech earlier this month.

At the same time, many small business owners and advocates remain worried. Now that everyone has had a first look at the nation's budget, these entrepreneurs question why the president keeps cutting the Small Business Administration's budget.

The facts show that the SBA has suffered an almost 50% cut in its budget since Bush took office in 2001. The $593 million tentatively slated for the SBA's 2006 budget is $85 million less than what was requested last year and a hefty $507 million less than the $1.1 billion doled out in the last year of the Clinton administration.

Yet, aside from a brief shutdown in early 2004, the SBA continues to meet the record demand for its popular 7(a) and 504(c) small business loan programs. The SBA is already outpacing last year's loan pace by 23% through the first quarter of fiscal year 2005 by guaranteeing over $3.5 billion through December 2004.

So how is the SBA able to do more with less?

One answer is that the SBA loan programs have had to become self-funding by raising the fees it charges to borrowers and lenders. The SBA has also increased the amount of loans it guarantees from $14 billion to a proposed $16.5 billion that has helped ease the fears of lenders and borrowers alike about another shutdown in the loan program.

The administration has also made cuts to programs and even plans to eliminate some like its Micro-loan program, the small business investment company (SBIC), and the Program for Investment in Micro entrepreneurs (PRIME).

It is these cuts that have some small business advocates like Kristie Darien worried. Darien is the legislative director for National Association for the Self-Employed (NASE), an organization that supports about 250,000 small business owners.

NASE members rely on SBA programs to get access to capital and to help grow their businesses, and she wonders whether the SBA can continue to meet the needs of her members and all small businesses if its budget keeps getting cut.

"While I believe that the president's administration supports small business, I want to see that come out in the bottom line of the SBA's budget," she said. "I would definitely like to see some more proof that the president believes small businesses are the economy's engine."

Last updated: Feb 14, 2005

DARREN DAHL

Darren Dahl is a contributing editor at Inc. magazine, which he has written for since 2004. He also works as a collaborative writer and editor and has partnered with several high-profile authors. Dahl lives in Asheville, North Carolina.




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