February 11, 2020
By Caity Witucki
Contributing Editor, Hot Topic Tuesday
Hot Topic Tuesday — SBA 25% Budget to Decrease in 2021 Says Administration
Yesterday, the White House released the Budget of the United States Government for Fiscal Year 2021. The budget requests $739 million in budget authority for 2021, a $243 million (25%) decrease from the 2020 enacted level.
However, due to the bipartisan insertion of an OMB SBA 7(a) subsidy accounting gimmick, the 2021 budget is expected to continue to meet the demand by borrowers and lenders for SBA loan products.
According to the White House, the 2021 budget will provide the SBA with $43 billion to assist small business owners in accessing affordable capital. “These products serve a variety of business needs, from funding general business operations, such as working capital and capital expenses, to fixed-asset financing for machinery and equipment, construction, and commercial real estate. They also provide the opportunity for small businesses to refinance existing loans.”
The message from the White House continues, “To ensure that SBA can provide these services at the least cost to taxpayers, the budget proposes that SBA set an upfront administrative fee across its business loan programs to levels necessary to offset a portion of the costs of providing this assistance.”
The decrease takes into consideration that 7(a) lending activity was down 11% last year and it is contingent on the pending GAO audit which affects whether the SBA program will have a subsidy in 2021.
However, the U.S. Senate Committee on Small Business & Entrepreneurship’s Ranking Member, Ben Cardin, and House Small Business Committee Chairwoman, Nydia M. Velázquez, have voiced their disapproval.
“With women and minorities driving growth in new business formation, SBA needs more resources to address the specific, historic barriers that entrepreneurs from underserved communities face, not fewer,” says Cardin.
Velázquez adds, “I am extremely disappointed that the Trump administration takes aim at the Small Business Administration by proposing to cut the agency’s budget by 25 percent, while also proposing cuts to federal entrepreneurial development initiatives by $93 million, a clear disinvestment in the hardworking small businessmen and women across America.”
Despite the budget proposal, strong Congressional bipartisan support will ensure SBA will receive the appropriations needed to continue to fund $43 billion for Main Street in 2021, with SBA 7(a) loan guarantees and SBA 504 funding to aid the nation’s 30 million small business owners and their partner lenders.