Originally created 01/16/04

Government reopens biggest loan program for small businesses after suspension



WASHINGTON -- The government reopened its biggest loan program for small businesses on Wednesday, a week after suspending it for a shortage of money, with an additional $470 million in temporary lending authority.

But the Small Business Administration, which runs the program of loan guarantees intended to help businesses that can't qualify for regular loans from banks, warned that the new money may not be sufficient to keep the program operating through Jan. 31 if demand for loans remains high.

The SBA had blamed the suspension on Congress. Lawmakers have not passed a $373 billion spending bill for the budget year that started Oct. 1, which includes money for the SBA.

Democratic lawmakers had said the holdup was an attempt by the Bush administration to gut the popular loan program. They warned that small businesses will have their access to capital crimped at a time when the economy is struggling to create jobs.

Democrats on the House Small Business Committee, led by its top Democrat Rep. Nydia Velazquez of New York, on Wednesday asked the panel to investigate the suspension and SBA's recent reduction in the cap on loans it guarantees.

Like most federal agencies, the SBA has been functioning under a temporary authority at 2002 spending levels.

Businesses' loan requests coming into the agency have reached record levels - some $45 million a day - far exceeding the money available, the agency said.

The strong loan demand led the SBA recently to cap the maximum loan it would guarantee through the program at $750,000, down from $2 million.

"It is critical to our nation's small-business community that the 7(a) program is back up and running as quickly as possible," SBA Administrator Hector Barreto said in a statement. "It is extremely important that Congress pass an annual appropriation to keep this vital loan program open, without interruption."

Similar disputes over the loan program between lawmakers and the administration have occurred before.

In May 1997, for example, Sen. Christopher Bond, R-Mo., then chairman of the Senate Small Business Committee, accused the SBA in the Clinton administration of failing to inform Congress that the program was running out of money.

On the Net:

Small Business Administration: http://www.sba.gov