Again, SBA will make do with less

The U.S. Small Business Administra- tion will continue doing more with less if Congress signs off on the Bush Adminis- tration’s proposed budget for fiscal year 2006.

At $593 million, the SBA budget amounts to spare change in a $2.57 trillion bankroll. Yet it will be among those taking a cut — at three percent, make that a paper cut — as the administration works toward its goal of halving the federal government’s $412 billion deficit over the next four years. Much of the proposed decrease can be attributed to a rollback in the money available for disaster loans, which Congress boosted this year in response to the hurricane destruction in Florida. Guess the election is over. But, to be fair, Sen. Maria Cantwell, D-Wash., noted Monday that Northwest farmers have relied on disaster aid when drought hurts crops.

Cantwell, who sits on the Senate’s Small Business and Entrepreneurship Committee, said she is generally pleased with the overall shape of the administration’s SBA package.

The budget again provides for $16.5 billion in lending authority for the popular 7(a) program, which provides guarantees to lenders they will recover up to 85 percent of loans up to $150,000, or 75 percent above that threshold. The agency’s other major endeavor, the 504 program, will get $5.5 billion in lending authority. A Small Business Investment Company debenture program gets $3 billion, although SBA Administrator Hector Barreto Monday said officials are concerned about some significant problems with that program.

Barreto praised his agency’s performance, noting that despite budget reductions, the SBA has processed more loans and increased services by working more efficiently, particularly by using the Internet more to distribute information. Consolidation of some functions has also produced savings. The agency, for example, saved $16 million last year by bringing all its loan liquidation operations into a single office in Virginia.

The three main programs cost the taxpayers nothing. Borrowers pay fees that cover administration costs and loan losses. Knowing that, it’s hard to understand why the administration is unwilling to venture more as the economy picks up, particularly in the Northwest.

Fred Schunter, president of the Northwest Business Development Corp., says applicants for 504 loans have overrun his office, as well as others around the country.

“We’re going to run out of money,” he says, noting an estimate by a national association the 504 program, which finances the purchase of commercial real estate, could absorb $7 billion this year.

Northwest Business Development, which covers all of Washington, Kootenai County and four counties in the Portland metropolitan area, has quintupled its loan production over the last three years, and will do about 20 percent more this year, Schunter says. All 204 loans now on the Spokane-based corporation’s books are current.

The 504 program’s performance nationally has been so good SBA lowered its fees by one-third.

Bob Beck, vice president of Mountain West Bank in Coeur d’Alene, said SBA has done well in the Inland Northwest despite cutbacks and centralization. To get the work done, he said, “everybody chips in.”

In particular, he cited the work of Gil Acevedo, an SBA loan officer in Spokane, who spent two days of his own vacation last year to get a loan package processed on extremely short notice.

“That’s some dedication,” Beck said.

Centralization, he added, has been irritating because work must be done to the letter of regulations, but it has also forced some lenders to clean up their acts, which helped cut taxpayer subsidization of the 7(a) program to zero.

Transformation of the SBA has been hard on some areas, the Inland Northwest among them. Some local organizations have had to step in and perform some of the services SBA once did, but business seems to be adjusting to the changes. If only lending authorities could be increased to meet new demand from a growing regional economy.

By the way, the full House Small Business Committee will hold a hearing on the SBA budget Thursday. The Northwest will not be represented. Incredibly, no Republican or Democrat from Washington, Idaho, Oregon or Montana sits on the committee. Nor does anyone from Alaska, Utah, Wyoming, Nevada or the Dakotas mind the store. How can this be in so vast a region where small business has a particularly important place in local economies?