WASHINGTON - Taking their grass-roots effort to save U.S. Small Business Administration programs to Congress, lenders say lobbying efforts have confirmed fears that loan programs could be jeopardized by budget-cutting.

"There is a very real possibility that there could be no small business loan programs," said Janine Perrignon, vice president at Commercial Bank of San Francisco, an SBA lender.

She was in the first wave of members from the National Association of Government Guaranteed Lenders who came to Capitol Hill recently to meet with SBA Administrator Philip Lader and to lobby Congress.

In pressing their case for preserving the popular programs, lenders say curtailments could reduce credit to small businesses.

"There might be some banks or nonbank lenders that will not be in the market," said David Pitts, vice president at Stillwater (Okla.) National Bank, another SBA lender. "They may stop lending to small businesses and devote more resources to financing large projects."

Talk of cutbacks came as demand for SBA loans has grown dramatically. In 1994 alone, loans rose 36%. With demand again outpacing its funding, the SBA this month reduced the size of its loan guarantee to $500,000, from $750,000. Bankers say the limit is already forcing them to turn away good loans.

Taking an early lead in the fight to preserve SBA programs, the lenders association is pushing for a higher loan limit while recommending a new fee structure and lower guarantee percentages.

"We are trying to find the type of cuts that won't alienate lenders so they won't turn away from doing small business loans," said Jackie Randle, an association spokeswoman.

The association is not alone in fighting Republican proposals to scale back the SBA.

The influential National Federation of Independent Businesses has been quietly backing the lenders' warning that changes could create a credit crunch. The group has told some in Congress that the SBA is responsible for as much as 40% of all long-term capital for small companies.

"Doing away with the programs would be throwing out the baby," said NFIB spokesman Gary Weidman. "We would agree, however, that there is a lot of bathwater that can be thrown out."

Ms. Oppenheim writes for Medill News Service.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.