Half Full or Half Empty?

Last updated on May 13th, 2019 at 02:36 pm

During President George W. Bush’s administration, the budget for the U.S. Small Business Administration has been cut by about 60 percent, down to about $546 million for 2006 from more than $1.1 billion at the end of the Clinton administration.
Critics say the administration is not supporting its lip service to small businesses, while defenders of the president say the SBA is simply doing more with less.
Indeed, although the funding has been slashed and the SBA staff levels have been reduced, the federal agency has issued $14.02 billion in 7(a) loans in 2005, compared with $8.58 billion in 2001, the year Bush took office. The agency issued $4.94 billion in 504 loans in 2005, compared with $1.94 billion in 2001.
Mike Stamler, director of the SBA’s press office, said the SBA issued record amounts of loans and loan guarantees through its most popular programs, the 7(a) and 504 programs, in 2005.
The Wisconsin SBA office has similar figures for 2005, with $377 million in 7(a) loans and $119 million in 504 loans. In 2001, the state division of the agency issued about $170 million in 7(a) loans and about $50 million in 504 loans.
However, some Milwaukee-area agencies that help small businesses, particularly women and minorities, to gain access SBA loans, are apprehensive about the budget cuts.
Wendy Baumann, president of the Wisconsin Women’s Business Initiative Corp. (WWBIC), an economic development corporation dedicated to helping women and minority entrepreneurs, said some of the programs her agency uses the most have been the targets of recent cuts.
The WWBIC offers entrepreneurs micro loans through the SBA to expand and help establish businesses. Although Bush initially zeroed out the micro loan program in his initial 2005 budget, funding was restored in the Senate.
Baumann said the president’s actions have not followed up on his campaign rhetoric.
"I don’t know if I understand – if small business is truly the engine (that drives the economy), why a government would want to cut the investment in support of small business," she said. "It seems counter-productive. The micro loan program is not a grant. We are lending out, in small loans, hundreds of thousands of dollars on the streets of Milwaukee and Wisconsin. They are paying it back. It works. Why would it be cut? I have to scratch by head a bit."
WWBIC hasn’t been directly affected by lower distributions through the SBA, Baumann said, because the organization started diversifying its lending base several years ago. Instead of just relying on the SBA for loan funding, WWBIC also receives funding from private foundations, corporations, religious organizations and individuals.
"We’re hoping that our federal base does not get eliminated," Baumann said. "But if it does, I want to be able to stand here and be able to talk about it."
Baumann said WWBIC formerly obtained about 25 percent of its outstanding loans from the SBA. Those funds helped pay for WWBIC staff to market the program, work with clients, bring proposals to its loan committee and other program support. That figure has been cut to 12 to 15 percent now, she said.
Baumann and others within WWBIC say they have also seen fewer services provided by the Milwaukee SBA offices, largely because there are fewer people working there to provide those services.
"They’re not staffed as high as they used to be, and therefore there are not as many services," Baumann said.
Eric Ness, district director for the SBA’s office in Milwaukee, declined to comment on the impact of the budget cuts.
Maria Monreal-Cameron, president of the Hispanic Chamber of Commerce-Wisconsin, said she also is concerned about cuts in the SBA’s budget over recent years.
"Whenever you have a decrease in funding, it impacts the target you’re trying to help access capital," she said. "Small business is very important to the economy, all over Wisconsin and in the United States. Small business owners help the overall economy in Wisconsin. And anything that impacts the accessibility to capital and the assistance of the SBA, we’re going to feel the impact."
However, Cameron and Matt Maigatter, assistant program director for Lincoln Neighborhood Redevelopment Corp., said that although they’ve seen fewer staff at the Milwaukee SBA office, their agencies have still been able to continue operations at the same level as before the cuts.
Stamler of the SBA said the agency has been streamlined in recent years to four centralized loan processing offices. Formerly, local offices would process SBA loans. The leaner operation has enabled local SBA officials to focus more on marketing the SBA programs and meeting with potential clients, Stamler said.
"That allows us to do the same work with fewer employees," he said. "It frees up our staff to be able to market the program to people instead of processing loans."
Another reason for the lower SBA budgets is that its two most popular loan programs, the 7(a) and 504 loans, no longer have a government subsidy. Those programs are now paid for through user fees, Stamler said.
"It’s a zero (subsidy) program that doesn’t require a federal subsidy to exist," he said. "That’s where a lot of the funny business comes from. When you talk about $100 million that is no longer necessary for the 7(a) program because it’s self-funded, is it a budget cut when you don’t need it any more? Is it a budget cut or savings? We think it is savings."
The 504 program began operating with no subsidy, relying only on fees generated by users, during the Clinton administration, Stamler said. This year is the first year that the 7(a) program has operated with no subsidy, he said.
The 2006 budget is somewhat deceptive in its low dollar amount, Stamler said. The SBA almost always receives supplements to its budget, he said. The agency’s initial 2005 budget was $593 million, but after several amendments, it reached $1.54 billion. Many of those amendments addressed natural disasters, he said.
Much of that money has not yet been lent out, Stamler said, and will likely be carried into the 2006 budget, which may not require an amendment.
Still, critics say the budget cuts are taking a toll.
"We’re extremely disappointed that President Bush has slashed the SBA budget to this extreme," stated Lloyd Chapman, President of the American Small Business League, a Petaluma, Calif.-based lobbying group that has generating a lot of noise about the SBA cuts. "This will undoubtedly have adverse effects on small and minority-owned businesses all over the country. I guess ‘compassionate conservatism’ does not apply to the 98% of companies in the United States that have less than 100 employees."
"The favorite target for President Bush’s axe is small business," said Sen. John Kerry (D-Mass.), a member of the Senate Committee on Small Business and Entrepreneurship, said in a statement. Kerry, of course, ran unsuccessfully against Bush for president in 2004.
"Since taking office, he’s tried to cut the SBA’s funding in half. The result is that over the last five years, the SBA has been cut more than any other agency," Kerry said. "The President does not understand the importance of small business to our economy, but small businesses that will boost job growth and our economy."

Loans Increase
Since 2001, the U.S. Small Business Administration has increased the dollar amounts of its two most popular loans programs, the 7(a) and 504 loans.
7(a) loans
2001 $8.58 billion
2002 $10.64 billion
2003 $9.76 billion
2004 $11.95 billion
2005 $14.02 billion
504 loans
2001 $1.94 billion
2002 $2.15 billion
2003 $2.84 billion
2004 $3.68 billion
2005 $4.94 billion

Small Business Times, December 9, 2005, Milwaukee, WI

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