Budget: Less Money for SBA, More for Loans

WASHINGTON (TheStreet) -- At least one lending expert says President Barack Obama's 2012 budget request for the U.S. Small Business Administration will hurt job growth, while the government points to what's being added.

"The key question is whether the cuts made in the small-business space will affect the recovery and impact job growth," says Rohit Arora, CEO of Biz2Credit, an online resource for small-business lending.

"Based on what's happening in U.K. -- where the government has made budget cuts a priority -- the answer is yes," he says in an emailed statement. "Republican deficit hawks do not realize that budget cuts in small-business lending will erode the competitiveness of small businesses in particular and the economy in general. It will create structural high unemployment."

Under the proposal, released Monday by the administration, Obama recommends that the SBA get $985 million, a 45% decline from the $1.78 billion enacted in the 2010 budget, which included $962 million in "supplemental appropriations" for fee reductions and credit programs, and down slightly from the requested 2011 budget, according to reference materials on the White House's website.

Funding for the SBA's small-business development centers and other administrative costs will decline the most in the requested 2012 budget, it says.

The request is $161 million higher than the 2010 budget, though, when taking into account such things as increased credit subsidies to improve small-business owners' access to capital, government officials said. Under the proposed budget, the administration is allotting $27 billion in loan guarantees to enable small businesses to "invest, expand and create jobs."

The administration plans to:

• Support $16.5 billion in loan guarantees ($14.5 billion of term loans and another $2 billion in revolving credit).
• Support $7.5 billion in guaranteed lending for commercial real estate development and heavy machinery purposes.
• Add $3 billion to support start-up firms through early stage and mezzanine small-business financing.

The administration also plans to make $25 billion in direct microloans available so intermediaries can provide small loans to entrepreneurs and other borrowers unable to get credit elsewhere, it says.