WASHINGTON - Despite opposition from the Bush administration and key Congressional Republican leaders, on June 15 the House passed an amendment that would restore funding to the SBA's 7(a) loan program. The amendment to the Science, State, Justice and Commerce Appropriations bill will restore funding for the program to the FY04 level of $79 million and do away with small businesses and lenders having to pay the upfront fees. House Small Business Committee Chairman Don Manzullo (R-Ill.) blasted the amendment saying it would "cripple" taxpayers and President Bush also opposed the amendment. The amendment, sponsored by Congresswoman Nydia Velzquez (D - N.Y.), Ranking Democrat on the House Small Business Committee, passed with a vote of 234 to 189. "The passage of this amendment is a step toward relieving entrepreneurs of these additional costs, and allowing them to do what they do best - create jobs and stimulate economic growth," Velzquez said. On June 6, CUNA and 12 other trade groups joined together to ask Congress for $79 million to fund the 7(a) loan program for 2006, an amount that was equal to funding obtained in fiscal year 2004. In 1995, nearly $200 million was appropriated for the 7(a) program; last year, funding for this program was eliminated completely and the program's costs were shifted to small businesses and their community-based lenders, the trade groups said. As a result, small businesses now pay steep upfront fees to use this program, impeding their ability to secure the financing they need, CUNA, the Independent Community Bankers of America and the other trades wrote at the time. The 7(a) loan program, which provides 30% of all long term loans, is a "proven job creator," Velzquez said. "For every $33,000 loan, one job is created," she said during the House floor debate, highlighting that the adoption of this amendment would help create an additional 500,000 jobs, and would help the program to achieve record levels of loans. House Small Business Committee Chairman Don Manzullo (R-Ill.) had blasted the amendment that would return funding of the SBA's 7(a) loan program back to Congress saying it would "cripple" taxpayers. Manzullo voted against the amendment, which would reverse the zero subsidy the loan program is currently operating under. Introduced in May by Velzquez Committee, it would reduce the fees lenders and borrowers pay; increase the size of loans eligible for a 7(a) guarantee to $3 million; and reinstate an arrangement that combined an SBA-backed loan with a CU or bank loan in a single financing package. Ironically, Manzullo said he led the effort to provide level funding for the flagship 7(a) loan guarantee program last year and believed then that the higher fees charged to lenders and borrowers for those seeking a loan of less than $700,000 would "dampen demand for the program." At least one influential group, the National Association of Government Guaranteed Lenders (NAGGL), one of the main associations that represents 7(a) lenders, also supported a zero subsidy, Manzullo pointed out. Velzquez said the program has been "hindered since the funding was eliminated and the costs of the program shifted onto small businesses and lenders," leaving small businesses having to pay "significant upfront fees" - anywhere from an additional $1500 to $3000 - to use the program. Manzullo said small business owners are actually only paying "about an extra $10 per month" for "a stable program that will last for the foreseeable future." "While some of my other colleagues will argue over the merits of the offsets in the Velzquez amendment, one cannot dismiss the fact that putting the 7(a) program back into the appropriations process will jeopardize the stability and predictability of the program," he said. Velzquez said the bill's passage is an important leap for borrowers and lenders. "At a time when our economy is lagging behind in job creation, and small businesses are heavily relied on to change that, this is a huge hurdle we have overcome - and we need to let our nation's entrepreneurs know that help is on the way," she said. -email@example.com
Amendment to Restore Congressional Funding Back to SBA's 7(a) Loan Program Passes in House
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