WASHINGTON - President Bush's proposed 40 percent budget cut for the Small Business Administration is meeting resistance on Capitol Hill, where Sen. Kit Bond is trying to get most of the money restored.

Bond, a Missouri Republican who served as chairman of the Bush campaign in Missouri last year, held a Senate committee hearing Tuesday on SBA plans to cut public subsidies of business loans by raising fees to the borrowers.

"The administration's budget request amounts to a retreat from the good work delivered by many of the core programs within the SBA," said Bond, chairman of the Senate Committee on Small Business.

Bush proposed cutting the SBA budget from the current $899 million to $539 million for the year starting Oct. 1. Bond has formed an unlikely alliance with Sen. John Kerry, D-Mass., in legislation that would restore $264 million of the cut.

"It seems to me the budget is out of touch with the needs of small business and what's good for the economy," Kerry said at the hearing. Last year, the SBA-financed companies generated 542,000 new jobs, Kerry said.

Bond said "we are beginning to see a trend" in adding fees to SBA loans. "Unfortunately, those fees fall on the shoulders of those that are least able to support them _ the nation's Main Street small businesses."

But John Whitmore, the acting SBA administrator who testified Tuesday, said charging fees for loans is justified and should have negligible impact on the small business climate. The year's savings to taxpayers is estimated at $114 million in the largest loan program. There are additional savings in other programs.

"We understand that small business may need access to guaranteed loans in order to access capital, but there is no requirement they shouldn't have to pay for it," Whitmore said after the hearing.

Whitmore said fees would only be charged on loans exceeding $150,000, meaning that 60 percent of loans would be unaffected. The average loan, about $240,000, would carry fees of about $10 a month on 15-year loan, Whitmore said.

Bond noted, however, that new fees would also be assessed for business management assistance and counseling that is now free. Many businesses can't afford to pay for professional help, Bond said.

A spokesman for a taxpayer advocacy group in Washington said the SBA cuts are part of the Bush tax savings plan that will benefit small business and everyone else.

"Small business would be much better off under an affordable budget and a lower tax regime than under subsidized loans paid for not only by individual taxpayers but by fellow small businesses," said Pete Sepp of the National Taxpayers Union. "This should not be a big fight for member of both parties to pick."

In addition to setting fees on loans, the SBA proposes to cut some programs altogether. The largest cut would be $52 million in New Market Venture Capital Program that helps businesses in economically distressed communities.

Whitmore said the program duplicates other government and private programs and was not producing nearly the return on taxpayer investment as other programs.

"The administration believes that targeted tax policy and other private sector incentives are the right formula to spur economic development with less emphasis on government outlays," Whitmore told the committee.

Another savings in the new budget would come from higher interest rates charged to businesses that get loans after natural disasters. The rate would go from 4 percent to a U.S Treasury security rate, now about 5.4 percent.

A Kansas City businessman, Alan B. Corbet, testified against cuts to the SBA's MicroLoan Program, which channels small loans through nonprofit corporations like the one Corbet heads _ The Growth Opportunity Connection.

The nonprofit entities get payments from the SBA to provide assistance to fledgling businesses or it gets loans that it in turns issue as loans of up to $35,000. About 160 nonprofit companies are in the program, which gets $30 million the existing budget.

"Funding levels must be maintained in order to succeed," Corbet said.

The bill that Bond and Kerry sponsored includes restoring money for the MicroLoan program. The bill unanimously passed the Senate and is part of ongoing discussion of a larger budget package to counter the Bush plan.