WASHINGTON Community banking groups are criticizing a portion of the Bush budget plan that would increase fees on loans funded by the Small Business Administrations 7(a) program.
Industry groups said higher guarantee fees would dramatically reduce bank participation in the loan program or the number of loans, though the SBA said the groups are overstating the potential impact.
We fully support the Presidents budget, an SBA spokesman said. Were really talking about a small increase in fees.
Congress has always appropriated money to pay for the 7(a) program, but the Bush budget would shift the burden to fees on borrowers and lenders.
The guarantee fee, which the borrower pays to the SBA for each guaranteed loan, would remain the same for loans under $150,000 and would increase by one-half of 1% for loans of more than $150,000. The annual lender fee, which the lender pays on the outstanding balances of SBA-backed loans, would increase from 0.5% to 0.8875% for loans over $150,000. The increase was proposed once during the Clinton administration but was not passed.
Under the plan, a $160,000 loan payable over 15 years would cost banks an extra $7 a month, according to SBA statistics.
The House Small Business Committee said it is not rushing to judgment on the issue.
We agree that the federal government should not be subsidizing, a committee spokesman said. But he added that the committee plans to meet with SBA officials and analyze the figures to make sure lenders and small-business customers are not overcharged.
A survey of members of the National Association of Government Guaranteed Lenders found that a majority believe loan volume would drop because the program would be less profitable and the costs for borrowers would increase too much.
It is, in effect, a tax on small business, said Tony Wilkinson, the groups president.
Kenneth Guenther, president and chief executive officer of the Independent Community Bankers Association, said he has joined forces with the guaranteed-lenders association and arranged meetings with members of Congress and with the SBA. If this budget proposal does go forward, I think it will mean that very worthy small-business people may find it more difficult to get loans, Mr. Guenther said. I dont think the administration has totally thought this through.