New Way to 7(a)
With no more federal subsidy, entrepreneurs are uncertain about the future of small-business loans.
Entrepreneurs are not sure what to make of the bill signed byPresident Bush in December to eliminate the $79 million federalsubsidy for the SBA's loan guarantee program-and with goodreason. Before the ink was dry, the spin was flying. One side,aligned with the White House, called it a small-business-friendlylegislative compromise that would save the SBA's 7(a) programby making it "self-sustaining." The other side saw it asan unnecessary tax on small-business borrowers.
They're both right to some degree. Congress raised theprogram cap to $16 billion from $12.5 billion, and restored themaximum SBA guarantee on 7(a) loans from $1 million to $1.5million. But making the program self-sustaining ultimately meanshigher fees for borrowers and lenders, who will now subsidize theprogram in place of the federal government, with the SBA in therole of facilitator.
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