SBA Says $593 Million Request for 2006 Budget Builds on Previous Years' Successes

WASHINGTON – The SBA recently requested $593 million for its 2006 budget which would provide $22 billion in loan authority for the agency’s flagship lending programs. During a Feb. 7 conference call, SBA Administrator Hector Barreto said the “budget request builds on the success of last year” and “proves that in times of fiscal restraints, the agency can still be effective.” As in fiscal year 2005, the 7(a) loan guarantee program will be at a zero subsidy, meaning that the program is sustained entirely by fees paid by the lenders and borrowers, without requiring an appropriation of taxpayer funds. Barreto said the subsidy will save taxpayers $90 million. The SBA had requested $16.5 million for the 7(a) program. There are now nearly 200 credit unions in the 7(a) loan program as of December 31, which is a 60% increase over 2003. Barreto cleared up what seems to be confusion on whether 7(a) fees have increased. “We didn’t raise the fees, they went back to their normal level,” Barreto clarified. “The fee structure is nominal to lenders. We’re up 30% (and) we’re requesting zero subsidy for 2006 as well.” Combination financing or “piggyback” loans were halted on Oct. 1 2004 but Barreto said the SBA is in “communication with the industry” on possibly bringing them back. “We’ve done them in the past, we understand their importance but we’re concerned about some of the issues such as the government being in second position,” Barreto said. The agency’s 2006 budget also calls for $810 million in lending authority for the Disaster Loan Program. Even with the four hurricanes that impacted several states last year, Barreto said there is enough funding to go around. So far, the SBA has loaned out $1.4 billion in low interest, disaster loans. He said the deadline to apply for such loans is Feb. 28. In response to a question about the loan disbursement being “backed up,” Barreto said “he’s not aware” of it. “We had four hurricanes. There’s been a tremendous amount of need and we’re working our way through this,” Barreto said, adding some potential applicants are still trying to determine what their needs are. The SBA has also requested $5.5 billion in lending authority for the 504 Certified Development Company program, another option credit unions participate in. Like its 7(a) sister, the program also calls for a zero subsidy. Other highlights of the budget request include a $3 billion program level for the SBIC debenture program with a zero subsidy; $1.3 million for the Office of Advocacy research; $750,000 for the National Women’s Business Council; $750,000 for Veteran’s Outreach; and $1 million for the Drug Free Workplace Program. Barreto said the agency is also working with the Department of Agriculture to bring assistance to rural areas. A program is expected to be in place by the end of the year. Meanwhile, one lending program that may be cut is the microloan program, which is available to nonprofit community based lenders (intermediaries) which, in turn, make loans to eligible borrowers in amounts up to $35,000. The average loan size is about $10,500. U.S. Senator Olympia Snowe (R-Maine), chair of the United States Senate Committee on Small Business and Entrepreneurship, has criticized the number of proposed funding cuts to SBA’s programs including the microloan program. “The SBA and its programs have a tremendous return on investment, as reflected in the jobs they create and the economic impact produce,” Snow said in a statement. “We must ensure that the SBA continues to sufficiently support its core lending, entrepreneurial development, and technical assistance programs. These annual cuts, taken cumulatively, threaten to significantly reduce small businesses’ ability to compete.” -