The OMB is trying to fix a machine that ain’t broke.

By Kent Moon

The Office of Management and Budget (OMB) is at it again—proposing SBA budget cuts. As a small-business owner and former analyst with the SBA in Washington, DC, I’m concerned cuts could dramatically reduce the small-business community’s access to capital.

The OMB is proposing to increase 7(a) loan fees to as high as 4 percent, claiming this will reduce the program’s costs to zero. However, the OMB has historically overestimated the cost of the 7(a) program. In fact, in the past five years, the program’s revenue has surpassed its expenditures by $1.3 billion. The OMB calls this a “negative subsidy.” Business owners call it a profit. In reality, the SBA 7(a) fees should be reduced.

Why is the program so important? The SBA can make deals the private sector can’t. For example, a 7(a) loan provides longer terms than a bank loan does, reducing payments and improving cash flow by up to 36 percent.

Small-business owners must urge Congress to evaluate the OMB’s calculations and determine why the 7(a) program’s cost is misrepresented. Contact your representatives, and encourage them to support the Kerry/Bond amendment to the 2002 Administration Budget to re-appropriate $117.7 million to the 7(a) program, providing $11 billion of 7(a) loans at an OMB cost estimate of about 1 cent for each dollar lent.

Capital availability is essential to business. Without an affordable SBA 7(a) loan program, the small-business capital gap will yawn even wider.