SBA, Running Low On Funds, Shuts Down Popular Loan Program

As the Small Business Administration moved to temporarily close down its most popular loan guarantee program, some worry that as the economy begins to recover, this is not the time to shut off funds to small businesses.

The SBA, which oversees loan guarantees for companies that don’t qualify for traditional bank loans, has not received its funds for the fiscal year that began in October. The agency blames the delay on Congress, which has yet to vote on a $373 billion spending bill that includes SBA funding.

The agency has been operating in the meantime under a temporary authority based on 2002 spending levels. At the same time, requests for SBA loans have been coming in at record rates, as much as $45 million per day, which is way above the funding the agency has for the program, spokesperson Sue Hensley told the Associated Press. Last week the agency took steps to place a $750,000 maximum limit on the loans it would guarantee, which is down from $2 million.

"Unfortunately, it's hindering us," she said. "We need to get a budget soon."

The SBA’s funding is often a source of political jockeying. This latest move is "the Bush administration's latest attempts to gut this critical program," said Rep. Nydia Velazquez of New York, senior Democrat on the House Small Business Committee, and reported by the AP. "As the economy struggles to create jobs, now is not the time to cut off small businesses from access to capital."

In 1997, Sen. Christopher Bond, R-Mo., then chairman of the Senate Small Business Committee, accused the SBA in the Clinton administration of failing to inform Congress that the program was running out of money, the AP reported.

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