Fee For All

The OMB is trying to fix a machine that ain't broke.
Magazine Contributor
2 min read

This story appears in the June 2001 issue of Entrepreneur. Subscribe »

The Office of Management and Budget (OMB) is at it again-proposing SBA budget cuts. As a small-business owner and former analyst with the SBA in Washington, DC, I'm concerned cuts could dramatically reduce the small-business community's access to capital.

The OMB is proposing to increase 7(a) loan fees to as high as 4 percent, claiming this will reduce the program's costs to zero. However, the OMB has historically overestimated the cost of the 7(a) program. In fact, in the past five years, the program's revenue has surpassed its expenditures by $1.3 billion. The OMB calls this a "negative subsidy." Business owners call it a profit. In reality, the SBA 7(a) fees should be reduced.

Why is the program so important? The SBA can make deals the private sector can't. For example, a 7(a) loan provides longer terms than a bank loan does, reducing payments and improving cash flow by up to 36 percent.

Small-business owners must urge Congress to evaluate the OMB's calculations and determine why the 7(a) program's cost is misrepresented. Contact your representatives, and encourage them to support the Kerry/Bond amendment to the 2002 Administration Budget to re-appropriate $117.7 million to the 7(a) program, providing $11 billion of 7(a) loans at an OMB cost estimate of about 1 cent for each dollar lent.

Capital availability is essential to business. Without an affordable SBA 7(a) loan program, the small-business capital gap will yawn even wider.

Kent Moon, president of Moon Capital Corp., is a nationally recognized authority in commercial lending. He has served in many SBA leadership positions, including a national post as a financial analyst and senior technical advisor. He is currently a member of the SBA's National Advisory Council. For more information about the OMB's proposed budget cuts, e-mail info@unitedsmallbusinesses.org.

Contact Source

More from Entrepreneur

David provides constructive insight to help businesses focus on their company growth, build brand awareness and know when and how to raise money.
Book Your Session

For a limited time only, get this bundle of Entrepreneur PressĀ® titles for less than $30 (60% OFF) on our bookstore when you use "LEAP" at checkout.
Buy Now

Are paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.
Get Your Quote Now

Latest on Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.