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7(a) Deadly Sins

Loss of SBA loan money has fingers pointing--but who will solve the problem?

By Stephen Barlas

Opinions expressed by Entrepreneur contributors are their own.

The SBA will be able to offer only $4.5 billion in 7(a)guaranteed loans this year--half the $9.7 billion it was expectingto offer.

The shortfall is due to a recalculation in the subsidy rate, afigure that determines how much in loans the SBA can guarantee. TheWhite House was forced to double the subsidy rate from 0.88 to 1.76percent in January due to cuts in 7(a) fees imposed by Congress.The move got the attention of Senate Small Business andEntrepreneurship Committee leaders. Sen. John F. Kerry (D-MA),chair of that committee, disputes congressional blame for thesituation, noting President Bush signed the bill lowering 7(a)fees. Moreover, borrowers and lenders will pay $179 million in feesand loan repayments in 2003, enough for a $10 billion program."The administration just didn't consider it apriority," says Kerry.

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