Rep. Nydia Velazquez, D-N.Y., introduced an amendment Thursday at a House Small Business Committee hearing that would have restored the credit subsidy that used to fund loan losses incurred by the Small Business Administration's 7(a) program.
The program is the SBA's largest; more than 5,000 banks made at least one 7(a) loan last year. The credit subsidy, which was about $80 million in fiscal 2004, have been replaced with income generated by increased fees on borrowers and lenders.
The amendment failed on a party-line vote - every Republican voted against it, and every Democrat voted for it - but introducing it gave Rep. Velazquez the opportunity to claim that the Bush administration and Republican lawmakers are piling costs on small-business borrowers.
"Securing affordable capital is always a challenge for small businesses," she said. "Unfortunately, Congress only made this an even more difficult task when they adopted the Bush administration's proposal to terminate funding" for the credit subsidy.
Rep. Don Manzullo, R-Ill., countered by saying the fee increases, which took effect in October, have had no apparent effect on the 7(a) program's performance. The amount of loans the program guaranteed in the last three months of the year rose 23% from a year earlier, to $3.56 billion.
The program "offers proof that the federal government can continue to provide excellent services to the American people on a lighter budget," he said.
Now that the subsidy issue is settled, experts expect the SBA's fiscal 2006 budget to pass with little difficulty. The budget would give the SBA the authority to guarantee a record $16.5 billion of 7(a) loans.
"It's not going to be the battle it has been in the past," said Anthony Wilkinson, the president and chief executive officer of the National Association of Government Guaranteed Lenders.
