To The Editor:
Rhonda Abrams’s recent column, “How Obama, McCain Plans Would Affect Small Businesses,” (Hartford Business Journal, Nov. 3), misrepresented the U.S. Small Business Administration’s loan programs. The column said: “President Bush increased fees and reduced bank guarantees for SBA 7(a) loans — as a result, this year SBA loans have fallen by 50 percent.” That is factually and demonstrably wrong.
First, SBA lending in the recently completed FY 2008 was down by just under 30 percent and the dollar value was down by just under 13 percent. The decline is due to a “perfect storm” of tightened credit by commercial lenders and reduced demand for loans from small business borrowers uncertain about the future.
As for SBA’s loan guaranty fees, the current guaranty fee structure was put in place in the fall of 1999, and has been absolutely unchanged except for an 18-month period in 2003 to 2004 when Congress temporarily reduced some of them and then reinstated the Clinton-era fee structure as of Oct. 1, 2004. And, the fee on the vast majority of SBA loans, 73 percent of them in 2008, is the same 2 percent that was established for those loans 22 years ago in 1986.
Again, the decline in loan volume is due to the current economic situation and not the fees, as evidenced by the fact that SBA-backed lending had set volume records in each of the previous three years under the current fee structure.
Sandy K. Baruah
SBA Acting Administrator
