WASHINGTON -- As part of this year's recently passed $388 billion spending package, the Republican majority eliminated all funding and increased fees for the largest source of small business loans in the country: the Small Business Administration?s 7(a) loan program.

"Republican leaders in Congress have rubber-stamped a proposal by President Bush that makes it even harder for small businesses to borrow money in America. That is simply wrong." said Sen. John Kerry, Ranking Democrat on the Small Business and Entrepreneurship Committee. "Once again, they're putting the costs of lending on the backs of small businesses -- the backbone of our economy and the very enterprises we're supposed to be helping."

President Bush requested, for the second time in four years, to eliminate all funding for the SBA's largest lending program, shifting the cost to small business borrowers and lenders. In fiscal year 2002, the Congress rejected the President's plan and restored funding. This fiscal year, the House and Senate again rejected the plan, voting to provide $79 million in the House and $70 million in the Senate, only to see the money disappear in late-night deals controlled by the Republican leadership and the White House.

Eliminating funding for the 7(a) program shifts more than $70 million in costs to small business borrowers and lenders that have already overpaid more than $1 billion in fees since 1992. The Republican plan doubles fees on the smallest borrowers. Small businesses seeking mid-sized loans will now face a 20 percent increase in fees. And for the very largest loans, those with guarantees over $1 million, there is an additional tax of 0.25 percent. And although the SBA?s 504 loan program is structured as combination loans, the Republican plan prohibited combination loans in the 7(a) loan program. These loans are important to mid-size businesses such as restaurants, small hotels, franchises and other small businesses that are members of the U.S. Chamber of Commerce, Women Impacting Public Policy, the American Bankers of Association, and the Independent Community Bankers of America.

In FY2004, the SBA's 7(a) loan program financed almost 75,000 small businesses, pumping $12.5 billion into our local economies. This financing created or saved an estimated 379,000 jobs. The Administration contends that shifting the cost to the small business community will provide stability for the program because it will no longer rely on appropriations; however, the problem has stemmed not from appropriations, but from the Administration's budget gimmicks and inaccurate accounting/subsidy rates. In fiscal year 2004 alone, the Administration's miscalculations led to a mid-year change in the subsidy rate, keeping 1,500 small businesses from getting loans.