SBA Seeks $17.5 Billion for 7(a) Loan Program for Fiscal Year 2007, Zero Subsidy Still in Effect

WASHINGTON – As the SBA’s 7(a) loan program enters its third year at a zero subsidy, the agency recently requested $17.5 billion to keep it going for fiscal year 2007. On Feb. 6, SBA requested a 2007 proposed budget of $624 million which authorizes $28 billion in loan and venture capital authority for the agency’s small business financing programs, according to Anne Marie Frawley, SBA spokeswoman. As in FY 2005 and FY 2006, the 7(a) loan guarantee program will be sustained by “modest fees” paid by lenders and borrowers and will not be subsidized by an appropriation. According to SBA, this has resulted in an annual savings to the taxpayer of about $100 million. There are more than 250 credit unions participating in the 7(a) loan program. The budget also proposes a fee on loans greater than $1 million made to small businesses to offset loan-making administrative costs. “The fee will have no effect on the vast majority of borrowers,” the agency said. SBA has also requested $7.5 billion for the 504 Certified Development Company program with a zero subsidy. “The SBA’s fiscally responsible FY 2007 request provides for record authority for small business lending and provides for the other key resources we offer to small businesses,” said SBA Administrator Hector Barreto. “From a lending perspective, this builds on our successes over the last four years, when we reached more small businesses, including more women and minority entrepreneurs.” It also proposes to continue providing “preferential loan terms” to victims of disaster. However, in order to contain the “escalating” costs of the program, it proposes keeping the current subsidized rates for the first five years after origination. Afterward, rates would graduate to Treasury instruments rates of similar maturity for an estimated savings of $41 million in FY 2007, the agency said. “These changes are necessary fiscal restraints that strike a balance between the needs of the SBA’s customers and clients with the needs of all American taxpayers,” Barreto said. “They will allow us to continue to operate more efficiently and effectively to meet the record demands of small businesses for financing, and of disaster victims for federal help over the long-term.” Other highlights of the proposed FY 2007 SBA budget include: * $3 billion program level for the SBIC debenture program with a zero subsidy (same as current year, according to SBA); * $900 million in lending authority for the Disaster Loan Program (five-year average); * $743,000 for the National Women’s Business Council (up from $741,000 this year); * $743,000 for Veteran’s Outreach (up from $741,000 this year); * $990,000 for the Drug Free Workplace Program (up from $987,000 this year). “We look forward to working with our oversight committees in Congress as the budget process moves forward to make sure the SBA continues to be America’s small business resource,” Barreto said. -