Magazine article American Banker

Backers of SBA Program Revamp Sounding Hopeful

Magazine article American Banker

Backers of SBA Program Revamp Sounding Hopeful

Article excerpt

Lawmakers, lenders, and small businesses want Congress to resolve the Small Business Administration's budget crunch before adjourning for the year, but how much time they will have to settle the complex issues dividing them is anyone's guess.

All sides got another crack at a deal Tuesday, when the House and Senate reconvened for a "lame-duck" session. Some lawmakers hope to conclude by the end of the week, but many observers said the session could last until Thanksgiving or later.

The main players in the SBA debate sound optimistic -- at least for now.

"We anticipate that a deal will be made," said Giovanni Coratolo, the small-business policy director for the U.S. Chamber of Commerce. A few months ago it formed the Access to Capital Coalition -- a diverse group of lenders and borrowers -- to fight cuts in the SBA's 7(a) loan guarantee program.

Rep. Nydia M. Velazquez, D-N.Y., told the National Association of Government Guaranteed Lenders on Friday that the issue would be the "top priority" for the House Small Business Committee, on which she is the ranking Democrat.

J. Craig Orfield, a spokesman for Sen. Christopher S. "Kit" Bond of Missouri, the ranking Republican on the Senate Small Business and Entrepreneurship Committee, said there is equal urgency to get something done in the Senate.

Because of a disagreement between Congress and the Office of Management and Budget over how much money the SBA should have to set aside in cases of losses in the 7(a) program, the agency will be able to guarantee only $4.85 billion of loans this fiscal year, which started Oct. 1. That would be about 60% less than the previous year.

Mr. Coratolo said that the coalition hopes for a deal that would provide for backing of about $12 billion of loans.

At the heart of the debate is the fact that the OMB's formula for determining how much SBA should keep in reserve -- and therefore cannot use to back loans -- considers default patterns as far back as 1986. …

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