Small Business Association Resumes Popular Loan Program Today

The San Diego Union-Tribune

Conor Dougherty

January 14, 2004

Jan. 14--The U.S. Small Business Administration will resume a loan program today that guarantees billions of dollars a year to small businesses looking to start or expand.

The Section 7(A) program had been halted last week after the SBA, which is operating without a budget, ran out of funds.

SBA spokesman Doug Heye said yesterday that Congress approved an extra $470 million in lending authority for the SBA, which should keep the 7(A) program afloat for the time being. In the meantime, the agency has been using stopgap funds that allow it to operate at 2003 levels.

"It's been a real problem operating this late into the fiscal year without an operating budget," Heye said. "That's why the 7(A) program ran into trouble in the first place."

But Heye said that because the agency continues to operate without a budget, loan size has been capped at $750,000, down from $2 million a few months ago.

It remains unclear whether the cap will be raised, even after the SBA's budget is approved.

"We certainly are happy that we got the $470 million, but there is a strong concern that it may not be adequate to keep the program up and running," he said.

The 7(A) program is designed to help small businesses that might have trouble getting a normal bank loan, and is distinct from other SBA programs, such as disaster funds, which are being used to aid businesses affected by last year's wildfires.

Through the 7(A) program, one of the SBA's largest, the agency minimizes risk to lenders by guaranteeing a portion of the loan; as much as 80 percent on loans up to $100,000 and 75 percent on loans of more than $100,000.

Of the $16.9 billion in loans and venture capital funding given out or guaranteed by the SBA last year, about half was in the form of 7(A) loans, according to the agency. The SBA has guaranteed an additional $3.3 billion in 7(A) loans since the start of its fiscal year on Oct. 1.

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