WASHINGTON - Today, Sen. John F. Kerry, Chairman of the Committee on Small Business and Entrepreneurship, called on the Administration to put aside election-year positioning and work with Congress to fix the shortfall in the Small Business Administration’s largest loan program.

Tomorrow, the 7(a) program will effectively be cut in half. To make matters worse, the SBA recently announced it will be capping the program’s loans at $500,000, down from the $2 million previously allowed. “It is inappropriate and irresponsible, at a time like this – with our economy still waning, and small businesses struggling – for the Administration to exacerbate the credit crunch and limit access to capital” said Kerry. “Instead of fixing the problem, instead of going right to the heart of the matter, the Administration has, yet again, side-stepped the issue. It seems irrational that the Administration would prescribe such a pill for our ailing economy.”

However, Sen. Kerry (D-Mass.) has attacked the problem head on. Along with Budget Committee Chairman Kent Conrad (D-N.D.), Small Business and Entrepreneurship Committee Ranking Member Kit Bond (R-Mo.) and Budget Committee Ranking Member Pete V. Domenici (R-N.M.), Kerry has presented a common-sense, bipartisan solution to the 7(a) program’s shortfall.

With the backing of multiple small-business and banking groups, the Kerry proposal authorizes the Office of Management and Budget to use more current data to accurately calculate the program’s subsidy rate. This rate, which determines how much the SBA needs to run the 7(a) program and protects it against loan defaults, would give the program the necessary funding to guarantee more loans and eliminate the need for a loan cap. The subsidy rate – which has been criticized by the Government Accounting Office -- currently overestimates defaults by 87 percent, resulting in chronic overcharging of lenders and borrowers that limits the number of loans that can be offered to small businesses and entrepreneurs. The GAO has estimated that borrowers and lenders have been taken for more than $1 billion since 1992.

“It is irresponsible for the Administration to continue gouging borrowers and lenders by using an incorrect subsidy rate,” said Kerry.

A study recently put out by the American Small Business Alliance shows the 7(a) loan program’s fiscal year 2003 cuts will cost small businesses $6.2 million and over 180,000 jobs.

Backing the Kerry-Conrad-Bond-Domenici proposal are the U.S. Chamber of Commerce, the Black Chamber of Commerce, the Hispanic Chamber of Commerce, the American Bankers Association, the National Association of Government Guaranteed Lenders, the National Association of Development Companies, the Association of Small Business Development Centers, the National Association of Women Business Owners, Women Impacting Public Policy, the Independent Community Bankers Association, and National Association of Small Disadvantaged Business Owners ###