Republicans Say No to Restoring Funding to SBA 7(a) Program

WASHINGTON - It appears the SBA's 7(a) loan program will continue to operate at zero subsidy as Republicans recently rejected restoring funding to the flagship program. Since last year, the program has been operating without a congressional appropriation or at zero subsidy, meaning it is self-supported through fees paid by lenders and borrowers. During conference on the House Science, State, Justice and Commerce (SSJC) bill and the Senate Commerce, State and Justice (CJS) bill - which includes funding for small business programs - GOP lawmakers rejected a bipartisan attempt to restore funding for the program, opting instead to leave in place the fee increases on small businesses that were levied last year. Borrowers and lenders, including credit unions, saw the SBA increase the fee on processing a 7(a) loan of $150,000 or less go from 1% to 2% of the SBA guaranteed portion and loans from $150,000 to $700,000 increase to 3% from 2%. The lender annual service fee also increased to 0.50%, up from 0.36%. The fee for loans over the $700,000 mark remained the same at 3.5%. CUNA and 12 other trade groups had previously joined together to ask Congress for $79 million to fund the SBA's 7(a) loan program for 2006. "For an administration that claims to be pro-small business, this most recent action tells a completely different story," said Rep. Nydia Velzquez (N.Y.), ranking Democratic member of the House Small Business Committee "The reality is that this fee increase is nothing more than an additional tax on small business owners. The GOP lawmakers who failed to restore the funding have put this nation's small business owners at risk - these entrepreneurs will now be faced with increased costs of doing business, less capital and less avenues for obtaining capital which will limit their ability to create jobs and stimulate growth." Velzquez said the increased costs of the program have already resulted in the loss of several key initiatives. In an attempt to cut the program's costs, SBA eliminated the LowDoc program, which serves entrepreneurs in rural areas, and the agency is in the process of scaling back the Community Express program - "an initiative crucial for minority business owners - making it even more difficult for these sectors to access affordable capital."