2004 Year in Review

Manzullo: SBA Loans Can Create 500,000 Jobs

(WASHINGTON) The U.S. House today unanimously passed bipartisan legislation to enhance the Small Business Administration's 7(a) loan guarantee program, allowing lenders to provide larger loans to small business owners so they can grow and create jobs for Americans. The legislation, which now heads to the Senate for consideration, could create up to 500,000 new jobs through September.

Sponsored by House Small Business Committee Chairman Don Manzullo (R-IL) and committee ranking member Nydia Velázquez (D-NY) and endorsed by the Bush Administration and industry groups, H.R. 4062 would nearly triple the loan guarantee a lender could provide to a small business owner seeking financing through the 7(a) program. The current $562,000 loan guarantee limit would increase to $1.5 million. The SBA estimates the additional $3 billion in loan authority created by the legislation will allow the SBA to guarantee an additional 30,000 loans through the end of the fiscal year, creating up to 500,000 jobs.

"Our small employers are ready to once again lead our nation to recovery, but they need our help. They need money to fund their expansions, and this legislation will provide them stronger opportunities to once again thrive and create jobs," Manzullo said. "I want to thank committee ranking member Nydia Velázquez and SBA Administrator Hector Barreto for their hard work in crafting this important legislation. I urge my counterparts in the Senate to quickly act on this legislation and send it to the President for his signature. The faster we act, the sooner our small employers can help put Americans back to work."

In addition to providing the highest loan guarantee limit in the 7(a) program's history, the legislation would restore the overall program to full strength. Earlier this year, a funding shortfall prompted the SBA to temporarily suspend the program for a week, reduce the maximum loan size to $750,000 and prohibit "piggyback” loans (new loans on top of existing loans.) The Manzullo-Velázquez legislation would restore the maximum loan size to $2 million and again allow piggyback loans. The legislation would also allow lenders to make loans up to $2 million in the paperwork-friendly SBA Express program, which offers a 50 percent loan guarantee compared to 7(a)'s 75 percent guarantee.

The additional loan authority provided through H.R. 4062 is gained from a host of fee adjustments primarily paid by lenders. The annual lender maintenance fee on 7(a) loans would increase from 0.25 to 0.36 percent. The lender would also pay a 0.70 percent up-front fee for piggyback loans. The small business owner would pay an additional 0.25 percent one-time fee for loan guarantees above $1 million.

Finally, the legislation extends the SBA's 504-loan program and the Small Business Investment Companies (SBIC) program through September 30, the end of the federal fiscal year. The remaining SBA programs are extended through June 4.

by  Editor, theCity1.com
April 1, 2004