By Jan Norman

The U.S. Small Business Administration's sudden suspension of guarantees under the popular 7(a) loan program has prompted a Congressional outcry. Sen. Olympia Snowe, R-Maine, and Rep. Nydia Velazquez, D-NY, immediately condemned the move announced Jan. 6 by Administrator Hector Barreto.

Then all the Democratic members of the Senate Committee on Small Business & Entrepreneurship sent a letter to President Bush condemning the ``lending holiday,'' and Sen. John Kerry, D-Mass, ranking Democrat on the committee sent a separate letter to Barreto.

The 7(a) loan program, designed to create jobs and boost the economy, provides more than $9 billion in loans, about 40 percent of long-term loans to small businesses at a cost to the federal government of $96 million to cover defaults, says the National Association of Government Guaranteed Lenders.

On Dec. 23, the SBA sent Congress the required 15-day notice that loan guarantees would be capped at $750,000, down from $1 million, as of Jan. 8, because of record numbers of loans during the first quarter. Lenders rushed their pending loans through the system, which more than doubled the daily loan volume, forcing the hyatis, said SBA spokesman Doug Heye.

The Democrats blamed the halt on the SBA's failure to ask for enough money to adequately fund the program in the 2004 budget.

NAGGL President Tony Wilkinson said, ``I expect one or both small- business committees (in the House and Senate) to schedule hearings about why they were misled about the amount of money needed.''