Lenders Hit SBA Cuts, Find Examiners Too Rigid

WASHINGTON - Lenders criticized the Clinton administration on Thursday for pursuing inconsistent policies on small-business loans.

Despite White House promises to encourage lending to smaller companies and start-ups, bank examiners are still too rigid in evaluating the credits, the lenders said.

And the administration's proposed changes in the Small Business Administration would severely crimp small-business lending, they warned.

Good Intentions Gone Awry?

"We are concerned that the focus of some well-intended solutions - including the administration's fiscal year 1994 SBA budget request - may only exacerbate banker's difficulty in lending to start-up and financially marginal small businesses," said Scott Wilfong, senior vice president of the First National bank of Maryland.

He testified on behalf of the American Bankers Association at a House Small Business Committee hearing on SBA funding.

President Clinton has proposed cutting the agency's budget by $169 million next year. He wants to cut the guarantee level on its popular 7(a) loan program from an average of 81% to 75%, and start charging a fee for participation in the secondary market for SBA-backed loans.

Anthony R. Wilkinson, president of the National Association of Government Guaranteed Lenders, added that the president's proposals would significantly increase the cost of the SBA program to both borrowers and lenders.

"If we are trying to foster growth in the small-business sector, why are we proposing to raise their costs of obtaining capital?" he asked.

A thrift executive warned that SBA changes could hinder the success of a pair of high-profile Clinton initiatives: community development banks and empowerment zones.

"There seems to be little rationale to handicapping a program that could be an essential element of these new proposals," said Douglas B. Kadison, chairman and CEO of Horizon Savings Association.

Current Funding

While the debate on SBA funding for next year continues, funds for loans guarantees this year have already run out. On Wednesday, the House approved $181 million in additional funding for SBA-backed loans this year, to provide an additional $3.3 billion in loans.

The Senate is expected to pass a similar measure in the next few days.

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