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 (OMB) is at it again-proposing budget cuts. As a small-business owner and former analyst with the SBA in , 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 to zero. However, the OMB has historically overestimated the 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

Get heaping discounts to books you love delivered straight to your inbox. We’ll feature a different book each week and share exclusive deals you won’t find anywhere else.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Entrepreneur Store scours the web for the newest software, gadgets & web services. Explore our giveaways, bundles, "Pay What You Want" deals & more.

Latest on Entrepreneur