WASHINGTON -- Today, Sen. John F. Kerry, Chairman of the Committee on Small Business and Entrepreneurship, called on the Bush Administration to reverse course and work with Congress to fix the funding gap in the Small Business Administration’s largest loan program. Current Administration policy would effectively cut in half $11 billion in loans made to small businesses annually.

“Small businesses are crippled by a credit crunch and the Administration's response has been to speak the words of helping small businesses while effectively cutting in half the loans which actually help small businesses create jobs. They've made a mockery of their promise to be an Administration committed to this country's small businesses.” said Kerry. “Bankruptcies are at an all-time high and 8.1 million Americans are without a job, and yet the Administration is willing to risk pushing even more entrepreneurs and workers over the economic cliff. It's time we insisted on some common sense.”

However, Sen. Kerry (D-Mass.) -- along with Senate 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.) -- has presented a common-sense 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 the federal government against loan defaults, would give the program the necessary funding to guarantee the full $11 billion in loans and eliminate the need for a loan cap.

“We've come forward with a bipartisan solution for the Administration to adopt so in tough economic times we can lend more money to more small businesses. But instead of joining with us in finding answers, the Administration has again side-stepped the issue,” added Kerry.

The Administration’s 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 overpaid more than $1 billion since 1992, while the lending industry estimates this number at close to $2 billion.