WASHINGTON – Some Small Business Administration loan programs could grind to a halt Friday without congressional action, a possibility that Maryland officials said could have serious consequences on small businesses in the state.
The House voted overwhelmingly Wednesday to pump enough funding into the loan programs to keep them going at previous, higher levels, through June.
But without Senate action, the cash-strapped programs could run out of money to lend by Friday, or be forced to severely restrict the amount of loans they make. And the Senate does not currently have any action scheduled on the issue, said Craig Orfield, a spokesman for the Senate’s Small Business Committee.
That would be a problem, said SBA spokesman Doug Heye.
“We’re certainly concerned that if the Senate doesn’t act soon, some programs will have expired,” Heye said. “We may even lower the cap on the program.”
Heye said one of the most important types of loans — 7(a) loans, in which a bank lends money if the SBA provides the guarantee — would likely not be frozen yet. But other options, such as co-sponsorships, small disadvantaged programs and maturity bonds, will end soon.
Congress has already stepped in once this year, approving $470 million at the beginning of the year to keep the SBA going, after it ended 2003 with a funding shortfall that forced the agency to shut down for a week.
When it reopened with the extra money, it was forced to cap the size of the loans it could offer, dropping the maximum from the previous $2 million to $750,000. Because of that, several businesses in Maryland had to reapply or look for loans elsewhere.
“But small businesses are not likely to get other financing, most likely most of them weren’t able to secure the loans,” said Damon Penn, a counselor in the Maryland Small Business Development Center.
Penn said another shutdown of SBA lending programs would affect the state because most of new jobs here are created by small businesses.
Bill Badger, president and CEO of the Anne Arundel Economic Development Corp., said the SBA funding problem is a concern for lenders as well as the businesses seeking loans.
He said his corporation has not been affected because it deals in loans of $300,000 and less for Anne Arundel businesses. But Badger said other lenders have had to readjust the size of their transactions, in contrast to previous years when the transactions were growing.
Even with those restrictions, however, the SBA was still able to give almost 500 loans to entrepreneurs in the state between October and February, said Raul Latoja, a loan processing assistant in the SBA Baltimore office.
Despite what SBA supporters claim, however, Orfield said funding for the SBA has already been approved through the end of the fiscal year on Sept. 30, and it will remain whether the Senate acts or not. The House bill merely authorizes extra funding, he said.
The House bill would allow loan sizes to return to a maximum $2 million, triple the loan guarantee limit a lender can provide from $562,000 to $1.5 million, and let the SBA back $3 billion extra of 7 (a) loans, among other changes.
Rep. Nydia Velazquez, D-N.Y., said the objective is to “make the 7 (a) loan program whole again” for the small-business owners who have been affected by the restrictions.
-30- CNS 03-31-04