SBA Outlines Proposed $724-Million Budget for ’99

The Small Business Administration is requesting a slightly bigger budget for fiscal 1999, including funding to check criminal backgrounds of loan seekers.

SBA Administrator Aida Alvarez said Monday that $1 million of the agency’s proposed $724.4-million budget would be spent creating a computerized criminal history checking system that could cut loan losses by $25 million.

The proposed system, plus ongoing loan loss-cutting methods, are why the agency is able to “do so much with so little,” Alvarez said in a nationwide media conference call.

This year’s SBA operating budget of $716 million would rise by only 1.1% next year, which Alvarez called a “very modest budget increase.”

But the small increase, coupled with improved lending procedures, would enable the agency to add 400 employees nationwide, open up to 30 new women’s business centers, nearly double its “microloan” program and increase by $2 billion its loan guarantee and capital commitments.

The agency has been severely criticized in years past by congressional members who focused on high loan losses in the agency’s largest lending program, the 7(a) loan-guaranty program. In response, 20 months ago the SBA began speeding up its loan liquidation procedures and finding new ways to collect more money on bad debts. The 1999 budget asks for $3 million to continue such work.

Criminal background checks are another method of reducing losses, said SBA spokesman Mike Stamler, who added that the SBA already does limited checking in some of its 7(a) loan programs. The groundwork for the system could be laid this year when the SBA begins work with the Justice Department to link to the National Crime Information Center, which stores criminal records electronically.

But Stamler added that criminal history alone would not automatically disqualify applicants. Only crimes that affect credit worthiness or the willingness and ability to repay the loan would put loan seekers at risk of denial, he said.

The cost savings from these measures would help the agency expand in other areas. Specifically:

* About 300 new employees could be added this year and 100 more in 1999.

* Up to 30 new women’s business centers would be added to the current 63. The centers provide counseling and guidance to female business owners.

* The microloan program and the 7(j) management training program for disadvantaged companies would receive additional funding.

* Although funding for the 7(a) loan program would remain the same at $94 million, improved subsidy rates would mean actual lending would increase from $9.2 billion to $11 billion in 1999. The subsidy rate--the percentage of money needed in reserve to back up the program--decreased to 1.4% in the 1999 proposed budget, compared with the current 2.1%.

* The LowDoc program, which features a one-page SBA application, could increase its maximum loan amount from the current $100,000 to $150,000. An announcement is expected in the next few weeks, Alvarez said.

Congress is expected to begin reviewing budget requests next month. The fiscal 1999 budget covers the period Oct. 1, 1998, to Sept. 30, 1999, and must be approved by Congress by Oct. 1.