Congress Frees More Money for SBA Lending Congress has given final approval to legislation freeing up more money for the Small Business Administration’s 7(a) loan program, but SBA has not committed itself to lifting the $500,000 cap imposed on those loans last fall. The House passed the bill, S. 141, by a voice vote Feb. 11 and sent it to the White House for President Bush’s signature. The bill directs SBA to adopt a new method for calculating the 7(a) program’s subsidy rate, lowering the default fees paid by borrowers. The change would enable SBA to boost 7(a) guaranteed lending authority to $8.2 billion from $4.8 billion for fiscal 2003, sponsors of the legislation said, funding 21,000 additional loans. Since October, SBA has capped 7(a) loans at $500,000, down from the previous ceiling of $2 million, because Congress had not passed the agency’s fiscal 2003 appropriation. Both houses passed the long-delayed appropriation Feb. 13. In House debate on the loan bill, Small Business Committee Chairman Donald Manzullo (R-IL) said passage of the bill “should also allow the SBA to reverse its recent decision to lower SBA loan limits.” The committee’s ranking Democrat, Rep. Nydia Velazquez (NY), declared, “With the passage of this measure, the SBA and the Administration will no longer have an excuse to withhold these funds from small businesses, and they must lift this cap.” But when asked whether the cap will be raised, SBA Administrator Hector Barreto replied, “Maybe.” Speaking to women business owners before the appropriations bill was passed, Barreto pledged only to “look at that again.” The administration’s last two SBA budget proposals have emphasized smaller loans. The 2004 budget says, “SBA is actively encouraging financial institutions to increase lending to start-up firms, low-income entrepreneurs, and borrowers in search of financing below $150,000.” Barreto said more than 80% of 7(a) loans are for less than $500,000. He said larger loans could be steered to the Section 504 program, which is most commonly used for the purchase of real estate. Several Congress members say lenders are also being charged unnecessarily high fees in the 504 program. Manzullo told the House, “The subsidy rate calculation error in the 504 is proportionately a bigger problem than the 7(a).”