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WASHINGTON – Operating at a zero subsidy allowed the U.S. Small Business Administration to guarantee more than $19 billion in loans in the agency’s fiscal year 2005, SBA Administrator Hector Barreto recently said. Testifying before the Subcommittee on Federal Financial Management Government Information and International Security Committee on Homeland Security and Government Affairs on April 6, Barreto said the agency’s FY 2007 budget request will allow up to $28 billion in financial assistance while maintaining zero subsidy. Overall, the SBA is requesting $624 million for its small business financing programs. “By restructuring key operations and reengineering loan programs, the SBA has achieved record program growth while operating more efficiently,” Barreto said. “When I became Administrator in 2001, SBA guaranteed roughly $14 billion in loans to 42,000 small businesses at a cost of over $110 million in subsidy.” Four years later, in FY 2005, Barreto said SBA guaranteed over $19 billion dollars at no subsidy cost to the taxpayers, and more than 98,000 small businesses received financing “at terms they could not have otherwise found.” Barreto told the committee that moving to a zero subsidy allowed the SBA “to continue to meet the financing demands of small businesses without a taxpayer subsidy” and “for the first time in several years, the SBA stabilized the 7(a) loan program and offered financing without loan caps or temporary suspensions of program availability.” Both CUNA and NAFCU have expressed concerns that any additional fee increases from the SBA could hurt credit unions and borrowers. On March 9, Grace Mayo, CUNA Business/SEG Services Task Force chairperson and president/CEO of Telesis Community Credit Union, testified before the House Small Business Committee’s tax, finance and exports subcommittee on the concerns CUNA has with the SBA’s 7(a) loan program fee increases. This year, additional fees have been proposed and existing fees are set to be raised further, making the program even more expensive, Mayo said. The aftermath of Hurricane Katrina is also expected to cause the program’s costs to rise in the near future due to an increase in defaults, she added. As in FY 2005 and FY 2006, the 7(a) loan guarantee program will be sustained by “modest fees” paid by lenders and borrowers and will not be subsidized by an appropriation, the SBA has said. There are more than 250 credit unions participating in the 7(a) loan program. The 2007 budget also proposes a fee on loans greater than $1 million made to small businesses to offset loan-making administrative costs. “The fee will have no effect on the vast majority of borrowers,” the agency has said. SBA has also requested $7.5 billion for the 504 Certified Development Company program with a zero subsidy. “There is still more work to do, but we are committed to delivering greater results for the American taxpayer,” Barreto said. “However, SBA’s programs alone cannot drive small business growth. President Bush’s small business agenda: making enacted tax cuts permanent, eliminating unneeded regulation, passing an association health plan bill and opening international markets to American goods and services is vital.” [email protected]

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