News From Congresswoman
Nydia M. Velázquez
Representing New York's 12th Congressional District - Brooklyn, Manhattan, Queens
Ranking Democratic Member, House Small Business Committee

For Immediate Release
February 8, 2005

CONTACT: Kate Davis, Allyson Ivins, (202) 225-4038

Small Business Continues to Bear Burden of Cuts in Bush's FY 2006 Budget
SBA request $85 million less than last year; again programs see drastic cuts

WASHINGTON - Congresswoman Nydia M. Velázquez (D-N.Y.), Ranking Member of the House Small Business Committee, today called the FY 2006 budget request of only $593 million for the Small Business Administration (SBA) - a request $85 million short of President Bush's sparse FY 2005 request of $678.4 million, and nearly half of what it was when Bush first came into office in 2001 - a failure for America's small businesses.

"What has now become an annual event is the slashing of SBA's budget by the Bush administration," Congresswoman Velázquez said. "It is difficult to ignore the fact that for President Bush's $2.5 trillion FY 2006 budget - SBA has once again been hit hard. Small businesses are the main job creators - and instead of advancing economic opportunities for them, this administration continues to hinder their ability through cuts in the budget."

In President Bush's FY 2006 budget for SBA, access to capital programs received numerous cuts. Once again the SBA's flagship lending program, 7(a) - which provides 30 percent of all long-term lending - received no funding for the second year in a row, in addition to imposing a new fee for lenders. For a $150,000 loan, lenders will now have to pay an additional $2,300 over ten years. Small businesses will also continue to pay an additional $1500 to $3000 fee on their loans, at a time when the costs of running a business are already high.

Congresswoman Velázquez was particularly concerned that the Bush administration continues to propose eliminating the Microloan program, which serves a unique role by providing small loans to start-ups, and targets mainly low-income entrepreneurs. Last year alone, this vital program provided $23 million in loans and $15 million in technical assistance to low-income business owners.

In addition, the budget proposed to terminate the Small Business Investment Company (SBIC) Participating Securities Program - the largest venture capital program - in turn limiting entrepreneurs' ability to receive equity capital. In 2004, firms in the SBIC Participating Securities program made over 2,100 investments in small business, totaling over $1.5 billion, with an average investment of almost $700,000. The elimination of the SBIC Participating Securities Program will also hinder minority business owners' ability to access venture capital. In 2004, 11 percent of the total number of SBIC program financings totaling $148 million went to minority-owned firms - the majority of this made through the Participating Securities program.

Congresswoman Velázquez called the budget for SBA, "a microcosm of the overall federal budget that has seen a number of small business and economic development programs being cut or eliminated." Other small business programs, such as the Advanced Technology Program (ATP), which was eliminated, and the Manufacturing Extension Program (MEP), which saw a 50 percent cut in funding, were affected. These were in addition to other SBA programs, such as the BusinessLINC program, Small Business Innovation Research (SBIR) Rural Outreach, the SBIR Fast program, which were all eliminated - and the HUBZone program, SCORE, Small Business Development Centers (SBDCs) Women's Business Centers (WBC), which all received cuts in funding.

"It is unfortunate that cutting those programs that benefit small businesses seems to have become a government wide trend in the FY 2006 budget," Congresswoman Velázquez said. "Given the fact that the Bush administration has been repeatedly touting the important role small businesses play in the economy - these cuts make absolutely no sense. How ironic that just last week the President said in his State of the Union address that he wanted to expand economic opportunities for women and minorities and then he releases this budget which cuts critical funding for the very programs that benefit these entrepreneurs - this seems to be a very unusual way of showing support to our nation's entrepreneurs."

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