WASHINGTON - Senators John Kerry (D-Mass.) and Olympia Snowe (R-Maine) are questioning why the Small Business Administration has yet to apply the new econometric subsidy rate calculation to 7(a) loans made to victims of the September 11, 2001, terrorist attacks. The Ranking Member and Chair of the Senate Small Business and Entrepreneurship Committee are concerned that unless the SBA uses the new model -- which is more accurate, costs less and would make more loan dollars available to small businesses -- the overall 7(a) loan program may run out of money.

In a recent letter to SBA Administrator Barreto, Kerry and Snowe questioned the agency's application of the new subsidy rate calculation, as it applies to Supplementary Terrorist Activity Relief (STAR) loans under the 7(a) loan program. The Senators requested an explanation for the SBA's failure to apply the new subsidy rate calculation - which determines the cost of the agency's largest loan program. According to industry experts, by applying the old subsidy rate calculation, the SBA has overcharged small business borrowers and lenders $1.5 billion over the past 10 years.

"Small companies - the real job creators in this country - are doing their best to keep their businesses and our country going in this weakened economy," said Kerry. "They need access to SBA loans more than ever, and we should not be penalizing them with faulty accounting methods that effectively reduce how much money the SBA can lend."

In February, Public Law 108-8 gave the SBA the authority to use the new subsidy rate method, known as an econometric model, to calculate the costs of all SBA 7(a) loans. Although billions of dollars in loans were made to victims of the 9-11 terrorist attacks through the SBA's 7(a) loan program, the SBA contends those STAR loans are not 7(a) loans and therefore should not be recalculated.

Senator Kerry has expressed his commitment to continue working with his colleagues and Chair Snowe to get the SBA to comply with congressional intent that the new subsidy rate apply to all 7(a) loans.