WASHINGTON — The Small Business Administration's 7(a) loan program could receive $17.5 billion and its 504 loan program would be earmarked at $7.5 billion under President Bush's fiscal year 2008 budget.
During a Feb. 5 media call, SBA Administrator Steven Preston told reporters the proposal sets overall spending for the year at $814 million, including $464 million in new budget authority, $329 million in carryover funds for disaster loans, and $21 million in reimbursable revenues, which are activities conducted by the agency that is asking for reimbursement including fees for SBIC examinations and lender oversight for the lender/loan monitoring system and reviews, at $11.4 million and $6.4 million, respectively. Lender/loan monitoring system and review fees were authorized in December 2004 and provide authority for SBA to charge lenders for onsite and offsite lender reviews and examinations, the agency said. A final rule is currently at the Office of Management and Budget pending final approval.
Meanwhile, the 7(a) loan program, popular among credit unions, will see a drop in fees, according to SBA. Program fees will drop from 55 basis points in FY 2007 to 49.4 in FY 2008. The 504 upfront fee will drop from 50 basis points to zero in FY 2008. More than 300 credit unions currently participate in the agency's 7(a) guaranteed loan program.
Preston said the reduced fees would allow the programs "to continue on the self-funding basis that has enabled them to produce record numbers of loans without interruption for more than two years." According to Christine Mangi, SBA press secretary, the "total effect of the fee reduction" does not appear in the budget rather "the fees are used in our calculation of the subsidy rate for these programs. The subsidy rates for these programs, even after fee reduction, are zero."
To illustrate, Mangi provided the following examples: for a 7(a) $100,000 loan, the basis point reduction will save the lender about $56 in the first year of the loan while the 50 basis point reduction on the upfront fee on a 504 $100,000 loan will save a borrower $500.
"While we remain concerned about the self funding and haven't seen the details of the budget proposal, this is an improvement over previous budgets in recent years," said Mary Dunn, CUNA senior vice president for regulatory advocacy and deputy general counsel. "CUNA strongly supports reducing fees and providing sufficient staff to process credit unions applications."
The 2008 budget represents a 5% increase over the total FY 2006 appropriations, excluding disaster and Congressional initiatives, and a 12% increase in core operating budget, the agency said.
The budget will also provide funding for more than $1 billion in loans in the agency's revamped disaster assistance program, which has undergone changes since the 2005 hurricanes along the Gulf Coast.
The proposal also requests continuation of SBA's micro loan program on a zero-subsidy basis, allowing the agency to expand its support to micro lenders across the country without seeking a new appropriation for the program. But SBA would also discontinue technical assistance funding for microlenders, and work with existing technical assistance providers. On the technical assistance side, the budget requests more than $87 million for Small Business Development Centers, almost $12 million for grants to Women's Business Centers and nearly $5 million for SCORE. –msamaad@cutimes.com
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