WASHINGTON – The Small Business Administration is once again disputing claims that its 7(a) loan program numbers are down as a result of supposed higher fees.
On June 12, Rep. Nydia Velzquez, (D-N.Y.) ranking Democrat on the House Small Business Committee, said that figures from SBA show that entrepreneurs received $160 million less through the 7(a) program for the first half of fiscal year 2006 when compared to the same time the previous year. Velzquez said the decrease can be partly blamed on higher fees incurred by lenders and borrowers.
SBA Spokesman Michael Stamler told Credit Union Times "it's important [that].the facts are not deliberately misrepresented." He counters that 7(a) loan volume doubled to a record 88,912 loans last year and as of June 2 the agency had approved 65,814 loans totaling $9.68 billion. The approval figure for the same date a year ago was 65,147 loans for $10 billion.
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Stamler said the 7(a) fee structure has also been misrepresented pointing out that fees are the same as they were in 2001. The guaranty fee on loans up to $150,000 is the same 2% it was in 1985 and the fee on the largest loans, at 3.5%, is the lowest it's been since 1995.
CUNA and others have said higher 7(a) fees could impede CUs' access to the loan program.
Velzquez said for the largest loans, entrepreneurs are now paying more than $50,000 at closing due to what she says are from increased fees and in the last quarter before the fee increases took effect, the program did nearly $4 billion in one quarter. "At a time when this nation's small businesses are struggling with skyrocketing energy and healthcare costs, the last barrier they should face is a rising cost of capital too," Velzquez said. "Unfortunately, as the latest loan numbers demonstrate, these costs are limiting access to capital for this nation's entrepreneurs."
Stamler said SBA has backed more loans in the last eight months than it did in any complete 12-month year before 2004. It was just over two years ago, in late 2003 and early 2004 that the program had to shut down completely because its volume was restricted to the "finite" appropriations provided by Congress, he added. "Since then, freed from the limitations of the appropriations process and funded totally by the fees that lenders and borrowers pay, the 7(a) program has been able to respond to the demand from small businesses for SBA-backed credit, no matter what that demand is, immune to temporary loan caps and immune to the temporary shutdowns that plagued it in prior years," Stamler said. Velzquez said a number of groups have been impacted by her claims of higher 7(a) loan fees. Small business owners in rural areas were hit particularly hard this past quarter receiving $300 million less in lending and 1,400 fewer loans, she said. Women entrepreneurs received $100 million less in capital and 2,000 fewer loans and veteran business owners received nearly $100 million less in loans, she claimed.
Stamler said SBA "is proud that its loan programs help extend economic expansion into every corner of the economy."
"SBA programs have increasingly helped minorities, women and veteran entrepreneurs and people in distressed communities," Stamler said. "We are also pleased that through our partnership with the private sector banking industry, these gaps can be addressed without subsidizing American free enterprise." [email protected]
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