Democrats Cry Foul on Plans for SBA Loan Program

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Nov. 3, 2005--Senate Democrats on Wednesday pushed for two amendments that would lower borrowing fees and increase funding for the Small Business Administration's (7)a loans, the federal agency's biggest loan program. But the SBA said that record loan levels show that the program is working just fine at its present levels.

The Democrats' two amendments on the SBA's (7)a loans are part of the commerce, justice, and science appropriations bill, which the House and Senate have already passed. House and Senate members are meeting this week in a joint conference committee to try to finalize the bill.

One amendment, attached by Sen. John Kerry (D-Mass.), would require the SBA to lower the fees for the (7)a small business loans when there is excess funding for the program. The Senate Democrats, in a letter on Wednesday, said that that the President's budget had miscalculated the (7)a loan program's cost by 69 percent more than what it actually cost, resulting in a $42 million surplus.

Another amendment, sponsored by Rep. Nidia Velazquez (D-N.Y.), calls for an additional $79 million appropriation to the loan program.

SBA spokesman Mike Stamler, pointing to the record levels of (7)a loans taken out in the last two years, said that such changes aren't needed. In fiscal year 2005, the program gave out $14 billion in 88,912 loans. In the previous year, the SBA gave out less than $12 billion in 73,392 loans. "This year, without facing limitations that the appropriations would place in the program, the fees in place were modest, the same as they were three, four, five years ago, and we think the program should continue to operate as it is," Stamler said.

He also questioned the Democrats' claim of a surplus. Stamler, calling the $42 million "an inoperable cost," said that newer estimates due February 2006 will provide a better description of the (7)a loan program's size.

In 2006, the SBA received $593 million in the budget, a 3 percent drop from 2005. The Bush administration had proposed a larger, 13 percent decrease, a proposal that the Democrats said Congress mitigated.

Kerry, the ranking Democrat on the Senate Small Business Committee, and nine other Democrats said in a letter that the Bush Administration has dramatically raised the loans' cost. "There's a reason Congress opposes the Bush Administration's continued attempts to raise the cost of SBA loans -- because it's bad for small businesses," Kerry said.