By Melanie Nayer

President Bush's proposal to cut loan guarantees provided by the Small Business Administration by more than half would have a direct and adverse effect on the fate of small businesses and available jobs in Rhode Island, according to small business advocates.

Under the proposal in Mr. Bush's budget for fiscal 2003, loan guarantees available to small businesses would be cut to $4.8 billion from this year's $10 billion, making it more difficult for small businesses to obtain such guarantees under section 7(a) of the Small Business Act.

"This financing is a critical issue in Rhode Island," said Lt. Gov. Charles J. Fogarty. "The SBA loan guarantee is a critical part of helping expand jobs in the state. The future of Rhode Island business and economy is going to be in small companies."

On Wednesday, Fogarty, who is chairman of the Rhode Island Small Business Advocacy Council, asked the Rhode Island congressional delegation and Sen. John Kerry, D-Massachusetts, the chairman of the Senate Small Business Committee, to oppose cuts in the SBA's section 7(a) loan guarantees.

Fogarty said that "98 percent of our businesses are small businesses, and one of the things I found is that access to capital is a critical thing to these companies. We are hopeful that members of Congress will rectify this situation. We need to stimulate the economy, not only in Rhode Island but nationally. We can't do that if we have a 50-percent reduction of small business loans available."

The 7(a) loan guaranty program is one of the SBA's primary lending programs. It provides guarantees of as much as 85 percent of an approved loan made to a small business unable to secure financing on reasonable terms through normal lending channels.

The 7(a) program would become self-financing under Mr. Bush's budget plan, which acknowledges that some small businesses may have trouble accessing private capital. He would increase fees sufficiently to make the program self-financing and save $141 million.

In the past 11 years, the SBA has guaranteed Rhode Island small businesses slightly less than $1 billion, according to Mark S. Deion, president of Warwick-based Deion Associates and Strategies Inc.

"Rhode Island's backbone is small businesses and its production is positive job growth," Deion said.

"In this state, if the 7(a) loans aren't there, you could eliminate thousands of dollars in loans to small business. Every single small business in Rhode Island should be communicating with the House and Senate Small Business and Appropriations Committees."

Fogarty warned: "This budget cut could have a serious impact in turning our country's economy around. What we can do at a state level is point out the real impact this budget cut has on our economy."