News From Congresswoman
Nydia M. Velázquez
Representing New York's 12th Congressional District - Brooklyn, Manhattan, Queens
Ranking Democratic Member, House Small Business Committee

For Immediate Release
January 28, 2004

Contact: Wendy Belzer, Kate Davis (202) 225-2361

Small Business Loan Program Still Faces Crisis

WASHINGTON - Congresswoman Nydia M. Velázquez (D-N.Y.), Ranking Member of the House Small Business Committee, today called the continuing crisis of the Small Business Administration's (SBA) 7(a) loan program "an unconscionable burden" on this nation's small businesses, especially given their ability to create jobs, which our economy so desperately needs right now.

"Each and every year we face the same problem - the 7(a) program continues to be woefully underfunded by the Bush administration," Congresswoman Velázquez said. "This problem needs to be addressed quickly and effectively by putting in the resources this program - and our nation's small businesses - certainly deserve. If the Bush administration is as dedicated to the small business community as it claims to be, why is this important access to capital initiative being left to struggle, even though it requires minimal investment."

In December, the SBA announced a cap of $750,000 on all 7(a) loans, and later shut down the program entirely for approximately a week. Even though the 7(a) program resumed earlier this month, the cap of $750,000 remains in place and the practice of "piggy backing," or allowing 7(a) loans to be used as part of a larger financing package, is prohibited. These two measures jeopardize over one-third of all SBA 7(a) loans, and leave many small firms unable to secure the capital they need to start-up and grow. Many small businesses that were depending on these loans and had their applications returned are now scrambling to find a dependable alternative.

In addition, the passage of the 2004 Omnibus Appropriations bill failed to solve the 7(a) loan crisis. The loan level provided under the FY 2004 bills is still $3 billion short of the $12.5 billion in demand that has been projected for the SBA's most important lending initiative in 2004. For the first quarter of 2004, 7(a) lending was on track to reach the $12.5 billion projection made last year by the National Association of Government Guaranteed Lenders (NAGGL).

"The passage of the omnibus bill was not a solution to the 7(a) loan problem," Congresswoman Velázquez wrote. "What we need is a hearing on this issue in an effort to find ways to stabilize the program both now and in the future. The SBA needs to reprogram existing funds to get the 7(a) program fully operational, and an administration request must be made for a supplemental appropriation to ensure the program can operate as it was intended for the rest of the fiscal year - without a cap or any other limitations."

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