Snowe Proposes "Fix" For Loan Program Senate Small Business Committee Chair Olympia Snowe (R-ME) has introduced legislation to free up additional money for SBA’s flagship 7(a) loan program. The bill does not include the Bush administration’s proposal to cut the federal loan guarantee to 50% from the current 75%. Snowe said her bill, S.2193, would lift the current $750,000 cap on loans and would permit “piggybacking,” the practice of using government-guaranteed loans as part of a larger financing package. SBA imposed the loan cap and prohibited piggybacking in January. Snowe proposed increases in lender fees that she said would allow SBA to meet the demand for loans through the end of the current fiscal year Sept. 30. Lenders have estimated demand will be around $12 billion, but the SBA budget would support only about $9.5 billion. The industry is willing to accept “a modest lender fee increase to get us through the balance of this year,” said Tony Wilkinson, president of the National Association of Government Guaranteed Lenders. He told Set-Aside Alert that all groups representing lenders are “unanimous” in opposing the administration proposal to reduce loan guarantees. “A business model with a 50% guarantee just would not work,” he said. SBA Administrator Hector Barreto outlined the proposed overhaul of the 7(a) program last month. (SAA, 2/20) Lenders said they had not been consulted before the proposal was released publicly. House Small Business Committee Chairman Donald Manzullo (R-IL) said he hopes to introduce 7(a) legislation before Congress begins a two-week recess April 3. By the most optimistic forecast, final congressional action on the legislation could not come before May, when the fiscal year will be more than half over. The Small Business Committee’s ranking minority member, Rep. Nydia Velazquez (D-NY), declared, “Sadly, the 7(a) program has been on life support since January.” Because of a surge in loan applications, SBA imposed a $750,000 cap on loans just before Christmas. The law authorizes guarantees on loans up to $2 million. The lending program was shut down for a week in January because Congress had not passed SBA’s 2004 appropriation, and the program was running out of money, Barreto said. Loan applications that had been submitted in early January were returned to the applicants. Rep. Velazquez said, “Small business owners — some who had put down their life savings, some who had plans to expand and hire new employees, some who were going to purchase new equipment — found themselves left in the lurch.” Snowe’s bill would require SBA to give first priority to applications that were returned in January. The bill is co-sponsored by Sens. Kit Bond (R-MO), Norm Coleman (R-MN) and Mike Enzi (R-WY). The Bush administration’s 2005 budget calls for increased fees to make the 7(a) program self-supporting. Barreto said that would save taxpayers $100 million. But Rep. Velazquez said it is another tax on small businesses.