Agency Says It Ran Out of Money
By Steven Gray
The Small Business Administration said yesterday that it suspended its main $9.4 billion loan program because it had run out of money.
The 7(a) Loan Guaranty program benefits business owners who typically do not qualify for traditional bank loans, said Sue Hensley, an SBA spokeswoman. Yesterday, major lenders said the program's suspension, even though temporary, is a sharp blow to small-business owners.
Some members of Congress, meanwhile, said the agency did not request enough money to meet mounting loan demand.
"Instead of taking action and avoiding past funding problems . . . the [agency] has repeatedly criticized the [lending] industry's projections as excessive and dismissed concerns about the program running out of money," Sen. John F. Kerry (Mass.), the ranking Democrat on the Committee on Small Business and Entrepreneurship, wrote in a letter to Hector V. Barreto, the agency's administrator. "At a time when the country has already lost 3 million jobs, it is astonishing that this administration would deny small businesses access to loans," wrote Kerry, who is running for president.
Congress did not approve a budget for the SBA before it adjourned last month. It passed a continuing resolution in October, giving the agency $3.3 billion until the budget is approved, but that money has run out and the administration is waiting for Congress to approve an additional $470 million that the Office of Management and Budget has allocated, Hensley said.
The decision to suspend the program came nearly two weeks after the agency said that, effective today, it would lower the cap on such loans from $2 million to $750,000.
On a typical day, about $40 million in loans are processed by the SBA. Between September and December, that daily amount rose to $56 million, and on Jan. 2 alone $115 million in loans were processed, Hensley said. "These banks and some of the lending institutions were saying, 'Get your big loans now, because there's going to be a cap.' "
By Steven Gray
The Small Business Administration said yesterday that it suspended its main $9.4 billion loan program because it had run out of money.
The 7(a) Loan Guaranty program benefits business owners who typically do not qualify for traditional bank loans, said Sue Hensley, an SBA spokeswoman. Yesterday, major lenders said the program's suspension, even though temporary, is a sharp blow to small-business owners.
Some members of Congress, meanwhile, said the agency did not request enough money to meet mounting loan demand.
"Instead of taking action and avoiding past funding problems . . . the [agency] has repeatedly criticized the [lending] industry's projections as excessive and dismissed concerns about the program running out of money," Sen. John F. Kerry (Mass.), the ranking Democrat on the Committee on Small Business and Entrepreneurship, wrote in a letter to Hector V. Barreto, the agency's administrator. "At a time when the country has already lost 3 million jobs, it is astonishing that this administration would deny small businesses access to loans," wrote Kerry, who is running for president.
Congress did not approve a budget for the SBA before it adjourned last month. It passed a continuing resolution in October, giving the agency $3.3 billion until the budget is approved, but that money has run out and the administration is waiting for Congress to approve an additional $470 million that the Office of Management and Budget has allocated, Hensley said.
The decision to suspend the program came nearly two weeks after the agency said that, effective today, it would lower the cap on such loans from $2 million to $750,000.
On a typical day, about $40 million in loans are processed by the SBA. Between September and December, that daily amount rose to $56 million, and on Jan. 2 alone $115 million in loans were processed, Hensley said. "These banks and some of the lending institutions were saying, 'Get your big loans now, because there's going to be a cap.' "
