Three SBA programs face closer scrutiny.
Recent changes made by Congress to the Small Business Administration's (SBA) leading lending programs can, depending on the prism you view them through, either make the loans more expensive or ensure their continued existence. At issue are the 7(a) and 504 guaranteed loan programs, plus the Small Business Investment Company (SBIC) program.
Congress felt the three programs were costing the federal government too much in the form of annual appropriations. The appropriations were necessary because the SBA was having trouble liquidating delinquent loans. That difficulty was a result of the rapidly rising number of loans and the rapidly plummeting numbers of SBA staff. For example, the 504 loan program set a record in fiscal 1996, with 6,884 loans approved.
The congressional Rx came in the form of the Small Business Programs Improvement Act. Introduced by Rep. Jan Meyers (R-KS), retiring chair of the House Committee on Small Business, it includes an SBIC amendment written by her Senate counterpart, Sen. Christopher Bond (R-MO).
The SBA's solution for the 7(a) program is to turn over liquidation duties to banks. That won't affect small businesses much, except those that had previously defaulted and got away with it.
However, Congress did impose a series of new fees on borrowers, lenders and others connected with the 504 and SBIC programs. "These changes are crucial," says Rep. Meyers, "not only to ensure the livelihood of a fundamental capital source for small business but also to establish a better balance between public and private program funding and to streamline liquidation duties that the SBA clearly can no longer handle efficiently."