In particular, the Administration’s request would cut the 7(a) loan program in half.  By providing loan guarantees to eligible small businesses that would otherwise be unable to secure financing, 7(a) loans fill the gap left by traditional private lenders and supply necessary capital for America’s small businesses to expand and create jobs.  

In 2001, this crucial program backed 43,000 loans worth over $9.9 billion to small firms nationwide.  Last year, 27 different financial institutions in Rhode Island approved 961 7(a) loans for a total of over $94 million to Rhode Island's small business community.  In fact, 7(a) loans make up nearly one-third of all long-term loans made to U.S. small businesses.  This program is important to every small business in America, and it deserves our continued support.    

Additionally, the Administration continues to overestimate the credit subsidy cost of the 7(a) loan program, forcing both borrowers and lenders to pay unnecessarily high fees.  If these estimates were revised, the SBA could lower its fees and lenders could attract more business.  Under the Administration’s proposal, Rhode Island would only be able to process 50 percent of its 7(a) loan volume from the previous and current year thereby decreasing loan assistance for the state by $50 million.  This would seriously affect the ability of small businesses to start and grow in Rhode Island, and hamper recovery in the current economic climate.  

The New Market Venture Capital Program designed to spur investment in low-and moderate-income communities and passed with overwhelming bipartisan support last Congress, has been zeroed out in this year’s proposal.  Funding for the PRIME program, which allows SBA to award grants to non-profit micro-enterprise development organizations, has also been eliminated.  Finally, BusinessLinc, which grants funding to local non-profit economic development organizations to assist them in bringing local businesses to the attention of large corporations, has been underfunded to the point that the program will effectively no longer exist.  Discontinuing these vital programs will negatively affect economic development initiatives targeted to low-income and minority business communities.  When an economic downturn is threatening businesses, jobs and families across the country, these kinds of cuts pose more danger than ever.

Mr. Chairman, small businesses are the backbone of Rhode Island’s economy and account for more than 98 percent of the jobs in the state.  They bring new and innovative services and products to the marketplace and provide business ownership opportunities to diverse and traditionally underrepresented groups.  Many of these small businesses rely on the valuable loan assistance, technical training and grant programs offered by the SBA.  The Administration’s harsh budget cuts would severely impact Rhode Island’s small business community, just when we need their contributions the most.  I would strongly urge the Administration to submit a proposal that sufficiently addresses the needs of the small business community, and I look forward to hearing more on these issues from our panel today.  

Thank you Mr. Chairman.