Many small-business owners will no doubt testify that part of their success was due to the ability to secure loans, often times through a Small Business Administration (SBA) program that guarantees loans, making them more attractive to approve for local bankers. But the federal government has been examining ways to cut the budget by introducing some changes, including a decrease in the guarantee level (to 50 percent from 75-85) and an increase in fees to lenders and borrowers.
Sen. Maria Cantwell has launched a campaign throughout the state to highlight a proposal that would not only leave the fees and guarantee levels untouched but also expand available funding.
“The administration proposal… would make the program uneconomical for borrowers while driving out all local SBA lenders and many national lenders from the progra
m…Its effect will be to deprive thousands of small businesses access to the capital that they need to build businesses and create jobs,” said the white paper prepared by Cantwell’s office regarding her proposal.
“A 50 percent guarantee is totally inadequate,” said Scott Harvey, Kitsap Bank senior vice president and SBA department manager. He says banks would have to pull out of the program if those changes were made, which would effectively penalize the local businesses. “This is the only national program that consistently helps create jobs. Small business is the engine that helps economic recovery.”
Harvey says the program is a moneymaker for the government, and for every dollar spent it has $7 in return through increased taxes. The reason it’s targeted, he says, is that small businesses don’t have a lot of clout. “When you’re looking at cutting expenses in the short term, it’s an easy target,” he said.
The proposal has been building up endorsements locally but not everyone is giving it the thumbs up. County Commissioner Jan Angel, a former banker herself, says the information presented seems to be incomplete. For example, she says, what are the delinquency statistics? What does the proposal mean by saying “little cost to taxpayers”? “If the administration is pushing for new jobs, why would they take the risk (of cutting the program)? It doesn’t jive,” she said. “Maria Cantwell has been a champion of labor and workforce…and they are doing great things but these questions are still very important.”
Efforts to get these kinds of questions answered by Cantwell’s local office did not prove successful. In the meantime, the U.S. Senate passed early in April HR 4062, a compromise between the two chambers on SBA 7(a) program for the next fiscal year. The legislation raises the program level to $12.5 billion and lifts the existing loan cap from $750,000 back to $2 million, among other things.
Regardless of this bill, Harvey said Cantwell will continue advancing her proposal: “She is still going ahead because she doesn’t believe lender fees should go up at all… because the effect would be an increase in taxes for small businesses.” According to the white paper, 90 percent of Washington companies are small businesses that employ about half of the state’s workers, and about 75 percent of new jobs are generated by those small businesses.
