SBA's Micro Loan Program on Chopping Block Again

WASHINGTON – The Small Business Administration’s Micro Loan program may be eliminated if President Bush’s 2007 budget proposal for the agency goes through. The lending program provides very small loans to start-up, newly established, or growing small businesses. SBA makes funds available to nonprofit community based lenders which, in turn, make loans to eligible borrowers in amounts up to a maximum of $35,000. The average loan size is about $10,500, according to SBA. It cost the agency roughly $15.5 million to operate the program last year. Bush and others contend the program has become too expensive to operate. SBA Spokesman Mike Stamler said loans through the agency’s popular 7(a) loan program are a more efficient and less expensive alternative to the Micro Loan program. Members of both the Senate and House of Representatives are against ending the Micro Loan program. The Senate recently passed a bipartisan amendment to its budget resolution that would restore $130 million to the SBA’s 2007 budget, including Micro Loan funding. Meanwhile, CUNA and others have criticized SBA’s proposed fee increases saying they will hurt borrowers and lenders. The fees for borrowers would increase to 0.04% for using the 7(a) loan program and 0.11% for the 504 program. Credit unions and other 7(a) lenders would see a 0.55% fee increase of outstanding principal on the guaranteed portion of loans, up from 0.545%.