Feeling the Pinch

When the SBA's 7(a) program ran out of funds in Januarybecause Congress failed to pass an appropriation for fiscal 2004,the SBA instituted emergency procedures, including lowering the7(a) loan ceiling from $2 million to $750,000. (In fiscal 2003, 95percent of 7(a) loans were for less than $750,000.) That capremained in place even after Congress passed the omnibus 2004appropriations bill in late January.

Bush's 2005 budget proposal, which was released in February,included a proposal the SBA says would put the 7(a) program on moresolid footing. The key component of that proposal, sponsored byRep. Don Manzullo (R-IL), chair of the House Small BusinessCommittee, reduces the 7(a) guarantee level from between 75 and 85percent to 50 percent--the same level as in the SBA Express loanprogram, a subcategory within 7(a). Express loans have been limitedto $250,000; nearly 50 percent of 7(a) loans are Express loansalready. The Manzullo bill would increase that figure to 100percent and raise the Express cap to $2 million.