By Cromwell Schubarth

It looks like another record year for loans backed by the Small Business Administration in Massachusetts.

But the bankers who make those loans look more worried than happy right now.

Midway through the 2002 federal fiscal year, the dollar value of SBA-backed loans to Bay State businesses is up nearly 8 percent, to $ 101 million, and the number granted, 848, is up 53 percent. A recent string of such record-setting years is about to end, however, under a plan by President Bush to cut in half SBA's cornerstone 7(a) loan program.

The administration budget has penciled in $ 4.85 billion for the program for the fiscal year beginning Oct. 1, down from nearly $ 10 billion this fiscal year.

This has SBA lenders and their allies seeing red.

"We're against any cuts whatsoever that would have a serious impact on banks and their ability to lend to small business," says Bruce Spitzer, spokesman for the Massachusetts Bankers Association.

The 7(a) loan program guarantees as much as 85 percent of an approved loan to a small business when banks consider them too risky to lend to otherwise.

Hector Barretto, Bush's new SBA chief, defended the cutback last week, claiming the recession reduced demand for the loans. He said that even with less money, the agency still can reach its goal of making more and smaller loans.

Barretto projects that his agency will have $ 2 billion in excess loan funds this year that can be rolled into next year's budget, easing the impact of the cuts.

Barretto's claims run counter to those of local bankers who say the recession has boosted demand, making a loan pool surplus unlikely.

"Demand isn't down for us," said Allan Kauders, the senior vice president in charge of SBA lending at FleetBoston Financial Corp., the national SBA loan leader.

Kauders said he doesn't favor an SBA budget cut, but thinks it might not affect Fleet customers as much as those of other banks.

"Our average SBA loan is only $ 60,000, where other banks average more than $ 200,000," he said.

Senate Small Business and Entrepreneurship Committee Chairman John F. Kerry (D-Mass.) vowed last week to fight the cuts.

"Particularly in tough economic times, with businesses struggling to keep their doors open, the small-business budget should be a catalyst to help get the economy moving again," Kerry said.

"The Federal Reserve's lending studies over the past year show 40 percent of banks have cut back on lending to small businesses," Kerry said. "(This is) making loans harder and more expensive to obtain and making the president's budget choices doubly irresponsible."