Women with Moxie

President Obama’s New Budget Impact for Biz Owners

Small business Administration, budget crunch, credit freeze, small business loans, women with moxie, moxie womenNew York Times reporter Robb Mandelbaum had a great synopsis on President Obama’s latest budget proposal and its affect on small businesses. In “Obama’s S.B.A. Budget: Doing Less With More” Mandelbaum discussed how small-business owners would get less from the SBA even though the budget is bigger. The investments the administration seeks to pour into transportation, infrastructure, etc. does not extend to big investments in the SBA.

But the S.B.A.’s general business loan, or 7(a), program is caught between two opposing pressures. On the one hand, borrower fees, as a percentage of the loan, are already the highest they can be under the law. But at the same time, government analysts have concluded that small-business borrowers are a riskier proposition than they used to be, so the amount of subsidy is higher for these loans. As a result, the Obama administration is asking for a subsidy that is two-thirds higher than the loan subsidy for 2012 — but even then, the agency would not be able to guarantee as many loans in 2013 as in 2012. The subsidy for 2013 provides for $16 billion in general business loans, down from $17.5 billion this year.

Hayley Meadvin, an S.B.A. spokeswoman, said that the administration’s budget would not deprive small businesses of credit. “We’ve set the caps at the historical averages,” she said. “We’ll still be able to serve all the small businesses coming to the S.B.A. looking for loans.” That will very likely be true if current borrowing trends hold steady: according to the S.B.A., for the first four months of the government’s 2012 fiscal year (which began in October), 7(a) loan approvals totaled $4.3 billion. At that rate, total lending for this year would come in well below even next year’s proposed smaller limit.

But small businesses would very likely feel other cuts, if the White House has its way. The administration wants to trim 8 percent off its funding for counseling programs, a slightly more modest haircut than it proposed last year at this time. Back then, the Obama administration sought a 10 percent cut to small business development centers — even as a similar counseling program, Score, was untouched — as well as a deep cut to the counseling that accompanies microloans.

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