SBA Programs Set for Major Overhaul

In the first development since Steven Preston was sworn in as administrator of the Small Business Administration less than a month ago, the Senate Small Business Committee has approved a major overhaul of the SBA’s programs.

Approval was unanimous for the three-year reauthorization of programs that will focus on improving the agency’s disaster loan efforts and other programs such as minority small business development.

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These changes come in the wake of severe criticism the department received following Hurricane Katrina. Long delays in processing federal emergency disaster loans for small business owners generated heated complaints from local business owners, senators and members of congress.

During his nomination hearing in June, Preston highlighted his commitment to fostering strong partnerships with private-sector groups to speed up the Katrina recovery process, and promised the reparation of the agency’s disaster loan program.

Sen. Olympia J. Snowe, R- Maine, one of the main proponents for change within the SBA, said that the new reauthorization takes steps to apply lessons learned from previous disasters.

“Authorizing the government to guarantee loans, rather than establish what is, in essence, a new temporary bank after each major disaster, saves the federal government money and enables the SBA to more quickly respond to the needs of disaster victims,” Snowe said.

Under the new legislation, the SBA would be ordered to create a new bridge loan program providing states federal guarantees on loans provided to assist with disaster relief. Help would also be implemented for businesses outside the geographically affected area that were impacted economically. Businesses potentially affected by significant increases in energy costs would be provided up to $1.5 million in loans.

The SBA also plans to back loans by private lenders to disaster victims at lower rates. Concerns of fraud within the SBA’s loan programs would be addressed with a strengthening of federal authority to prosecute large corporations attempting to illegally gain small business loans.

The reauthorization also calls for the implementation of a minority small business development office. An estimated $5 million annual budget will be provided for the proposed minority office. Nonprofit organizations also stand to benefit from the legislation, as the SBA would be allowed to loan nonprofit institutions anywhere from $1.5 to $5 million. Currently only renters and for-profit businesses are eligible for loans.

A timetable for a floor vote on the legislation is not yet known.

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