SBA Budget Draws Criticism

While the $624 million budget request would be the first increase in five years, the Small Business Administration also plans to raise loan fees in 2007.

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Feb. 8, 2006--The Small Business Administration announced on Monday what it called a "fiscally responsible" $624 million budget request for FY 2007, drawing criticism from some lawmakers over a proposed increase in loan fees.

If approved, the budget would be the agency's first funding boost in five years. In November, Congress set the 2006 SBA budget at $456.5 million, a drop from $579.5 million in 2005 and less than half of what it was in 2001.

Still, both Democrats and some Republicans said the 2007 budget, which includes $900 million over five years in lending authority for disaster loans, contained deep cuts in non-disaster spending -- by as much as $105 million -- and additional fees for the widely popular 7(a) loan guarantee program, among other lending programs.

"All of these programs already receive no appropriations to subsidize their loans," Sen. Olympia Snowe (R-Maine) said in a statement. "I support a reasonable budget, but increasing fees paid by small businesses is not the way to achieve that goal.

The SBA guaranteed more than 88,912 7(a) loans valued at some $14 billion in 2005 -- $2 billion more than in 2004 -- with loans typically averaging about $160,000, according to the agency.

It claims the fees, which can amount to several thousand dollars per loan, have saved taxpayers some $100 million a year.

"These changes are necessary fiscal restraints that strike a balance between the needs of the SBA's customers and clients with the needs of all American taxpayers," SBA Administrator Hector Barreto said in a statement attached to the budget request.

In November, Rep. Nydia Velasquez proposed a $79 million subsidy for 7(a) loans in an amendment that was ultimately cut from the final appropriations bill, along with similar initiatives by both Snowe and Sen. John Kerry (D-Mass.).

On Tuesday, Velasquez called the 2007 budget request an "attack" on the nation's entrepreneurs. "The realities of the administration's actions clearly do not match up with their small-business rhetoric," Velasquez said, referring to pro-small business initiatives announced by President Bush in his State of the Union address.