Free Rein

President Bush's proposed fiscal 2004 budget keeps the reinstight on the SBA's workhorse 7(a) loan program but gives extragiddyap to the 504 Certified Development Loan Program. Those twoprograms, in addition to the Small Business Investment Company(SBIC) program, are the SBA's three big financial steeds.Approving 51,661 loans in fiscal 2002, the 7(a) program is theSBA's highest-profile offering. These loans are generally usedfor working capital and go to small businesses turned downinitially by private lenders because they lacked a track record orcollateral. Bush is asking Congress for $95 million to support a$9.3 billion 7(a) loan ceiling. That is below the $12.2 billionceiling set by Congress in 2002, although that year'sauthorization level was expanded by one-time Supplemental TerroristActivity Relief (STAR) loans.

As opposed to the 7(a) program, where loan demand bumps upagainst the ceiling every year, 504 Certified Development Company(CDC) loans don't normally approach their authorized ceiling,which will be $4.5 billion in fiscal 2004. The long-term,fixed-rate financing CDCs offer is used for major fixed assets,such as land and buildings. Those loans have been increasing, saysChris Crawford, executive director of the National Association ofDevelopment Companies. "Dollars lent are up 30 percentyear-to-date in fiscal 2003 vs. fiscal 2002," he says. Thattrend is likely to continue into 2004 because the proposed budgetreduces the fee the CDCs have to pay the SBA. As a result, feespaid by small-business borrowers to the CDCs will decrease infiscal 2004.