Will The Gov's Eliminate SBA Subsidies?

Will The U.S. Government
Do Away With Financial Assistance
for Small Business Loans?

For the past several years the Small Business Administration (SBA) has guaranteed approximately 40% of all long-term business loans for small businesses. The Bush administration is proposing to make the 7(a) program self-supporting by eliminating government subsidies for program administration.

What does the SBA 7(a) loan program do? It allows small businesses to get funding. The government guarantees up to 85% of the loan on amounts of $150,000 or less and 75% on larger amounts. Small business owners benefit by getting better access to loans and loans available for the long term, rather than requiring payback in just a couple of years or a few months.

Recently, a survey by the National Association of Government Guaranteed Lenders (NAGGL) of their membership found that 76% of these loan sources plan to decrease their SBA 7(a) lending if the elimination of subsidies passes. Another 7.6%, including some of the largest lenders, will probably stop offering the loans completely because of increased fees.

Size of Loan	Current Fees	Proposed Fees	Yearly Service Fees
Under $150,000	2%		0.5% / 0.8875%
$150,000 - $700,000	3%	3.5%	0.5% / 0.8875%
$700,000 +	3.5%	4.0%	0.5% / 0.8875%

The fees currently paid by lenders on loans written from 1992 - 1998 have returned $1.3 billion to the Treasury so far of the $1.4 billion in subsidies appropriated for the program. With fees still coming in, the NAGGL contends that the programs are already paying their way over the long term.

Ironically, as I write this, Boeing is touring Denver as one of their three post-Seattle choices. Dallas, Chicago and now Denver are offering their best incentives to Boeing in order to relocate in their cities. The SBA loan guarantee programs not only provide cash for the owners of small business, but they are a mighty force in economic growth in the U.S., outweighing the employment and taxpayer impact of the Fortune 500 companies. The changes in subsidy may look small but they can prevent some businesses that can be funded now from getting money. Don't you think that making loans for small business available is an important function of government? Perhaps at least as important as incentives for big businesses?

What should you do about it?
Well, you can decide to apply for a 7(a) loan before the changes occur. Check out our guide to SBA loans at by clicking here.
You can also contact your Representative or Senator to express your opinion.

House of Representatives Committee on Small Business: http://www.house.gov/smbiz/.
Email contact: smbiz@mail.house.gov.

Members of the Committee: http://www.house.gov/smbiz/about/members.htm

House Committee On Appropriations: http://www.house.gov/appropriations/members.htm

Senate Committee on Small Business: http://www.senate.gov/~sbc/

Senate Committee On Appropriations: http://www.senate.gov/committees/
committee_detail.cfm?COMMITTEE_ID=405

For contact information on writing to your representative go to http://www.house.gov/writerep/.

-Cindy Nemeth-Johannes