CDFI and SBA News

Budget Provides Increase for SBA

February 12, 2008 --The Small Business Administration is provided with $663 million in budget authority, an increase of 17 percent over the FY2008 level.

The budget supports a program level of $17.5 billion for the 7(a) general loan program, $7.5 billion for the 504 Certified Development Company program and $3 billion in venture capital support under the Small Business Investment Company (SBIC) program, equal to current support. The 7(a) and 504 programs continue to operate without subsidies and are sustained solely through fees paid by lenders and borrowers.

The Small Business Development Center program is cut by $10 million to $87 million. Funding is eliminated for the Microloan, Microloan Technical Assistance and PRIME programs. However, the budget request "proposes to build upon the success of the zero-subsidy 7(a) program by making the Microloan program self-financing through modest increases to the interest paid by program intermediaries." This shift would generate a program level of $25 million for FY2009. Congress has rejected this policy changes and budget cuts in recent years.

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Budget Includes Two Years of CDFI Funding

February 11, 2008 --The President's fiscal 2009 budget proposal provides $28.6 million for the Treasury Department's Community Development Financial Institutions (CDFI) Fund, a decrease of $65.4 million. Funds would be available through FY2010. Of this amount, no more than $13.7 million could be used to administer the New Markets Tax Credit program. No funds are requested for the Bank Enterprise Awards (BEA) program, currently funded at $20 million.

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SBA Budget Authority Falls Under Final FY 2008 Spending Package

January 16, 2008 --The Small Business Administration (SBA) is provided with $569 million in budget authority, $3 million under the FY 2007 level.

The 7(a) general loan program continues to be sustained by fees paid by lenders and borrowers and would maintain a program level of $17.5 billion. The 504 Certified Development Company program receives $7.5 billion in lending authority and continues to operate with a zero subsidy

The Small Business Development Center program is provided with $97.1 million, an increase of $8.1 million. The Microloan program receives $17 million (a reduction of $5 million), Microloan Technical Assistance receives $15 million (an increase of $2 million) and PRIME is provided $3 million (an increase of $1 million).

The HUBZone program is provided $2.1 million, an increase of $100,000. The conference report contains language stating that the "Appropriations Committees are aware that there are certain rural areas that are underutilized business areas but are excluded from HUBZone designation based on the current program authorization. SBA is encouraged to continue to examine ways to incorporate these areas into any future revisions of the Small Business Act."

The bill provides SBA with the ability to transfer funds between programs, as longs as the transfer does not exceed five percent of the program's appropriation.

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Omnibus Spending Package Increases CDFI Funding

January 16, 2008 --The omnibus spending package contains $94 million for the Treasury Department's Community Development Financial Institutions (CDFI) Fund, an increase of $39 million. The funds will remain available through the end of fiscal year 2009. Of this amount, $13.5 million can be used to administer the New Markets Tax Credit program. In addition, $8 million is for training, outreach and technical assistance in Native American communities. The measure directs the Department to fund the Bank Enterprise Award (BEA) program at no less than $20 million. The administration's proposal provided no funding for the BEA program.

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House Approves SBA Reauthorization Legislation

November 12, 2007 --On November 6, the House adopted legislation (HR 3866) reauthorizing the Small Business Administration’s (SBA) loan and venture capital programs. The bill authorizes $29.3 billion annually, through FY2009, in loan guarantees for the Small Business Administration’s (SBA) 7(a), Microloan and Section 504 Certified Development Company (CDC) programs. The measure now awaits Senate action.

The measure authorizes $20 billion for the 7(a) program, $8.5 billion for the 504 CDC program, $750 million in Defense Economic Transition Assistance (DELTA) loans and $50 million in Microloan guarantees, $110 million for the direct Microloan program and $80 million for Microloan technical assistance grants. The bill also extends the authorization for the Small Business Development Center and HUB Zone programs.

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House Renews SBIC and New Markets Programs

October 1, 2007 --On September 27, the House passed legislation (HR 3567) reauthorizing the Small Business Investment Company (SBIC) and New Market Venture Capital programs.

The measure renews the programs through 2010 and creates a new Angel Finance program. The initiative would fund licensed investor groups that would be required to invest in small business startups. The groups would be eligible to receive up to $2 million from the program, which they would have to match. A total of $50 million would be authorized for the program, $10 million in FY 2008 and $20 million in FYs 2009 and 2010.

In addition, the bill modifies the New Markets program by directing the Small Business Administration (SBA) to reduce capital requirements for companies primarily investing in small manufacturers and allow companies that receive conditional approval to receive up to $50,000 in initial start-up grants.

For more information, visit http://altmire.house.gov/list/press/pa04_altmire/SBAbill.shtml.

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NADO Survey Reveals RDOs Are
Often Primary Sources of Rural Development Finance

January 30, 2002 -- As part of the president's FY2003 budget proposal, the CDFI program was directed by Congress to provide a report on its lending practices in rural America. Among the factors contributing to the lack of CDFI grantees in rural areas, according to NADO, is that public entities such as regional development organizations are excluded from the program.

At the request of CDFI, NADO conducted a quick survey of its members to determine the level of lending competition in their serve area. Following is a letter outlining the results:

January 29, 2002

Dr. Amy Rose
CDFI Fund
601 13th St., NW
Suite 200 South
Washington, DC 20005

Dear Dr. Rose:

In response to your request of January 24 for data about the reliance of rural America on public entities for business development loans, I am pleased to provide you with the findings of a survey of members of the National Association of Development Organizations (NADO) and the Economic Development Finance Service (EDFS).

The data reveal that 49 percent of the 45 responding organizations whose service areas cover 328 rural counties are the sole non-bank lenders in all or part of their service areas, illustrating the critical role of public entities in creating private sector jobs in rural America. There are large portions of rural America served only by these regional organizations, which have extensive experience making loans and creating jobs.

A recent EDFS report shows that EDFS members manage a median of three loan funds whose median age is eight years (some have been lending for 25 years) and that 27 organizations have created and retained 70,000 jobs (see enclosed report).

The following chart summarizes the findings of a survey emailed to 260 NADO members and 120 EDFS members January 24, 2002. We will continue to compile the results of surveys that arrive after today and provide them to you.

The 328 counties served by the 45 responding organizations represent 14 percent of America's 2,300 rural counties. Those respondents who volunteered that a statewide lender serves their area were counted as having competition throughout their service area, even though several mentioned that these statewide funds have not made a loan in their service area in several years. One respondent noted that even though there are other funds in their service area (Community Development Block Grant revolving loan funds), the regional organization manages them on behalf of the counties where the funds are located. (This respondent was counted as having competition.) A future survey will ask what types of organizations also lend in their service areas. We would also be interested in helping CDFI with future data collection.

The National Association of Development Organizations (NADO) is a public interest group founded in 1967 to promote community, economic, and rural development in America's small metropolitan and rural regions. The association is the largest and leading advocate for a regional approach to development. NADO's members are regional development organizations that work directly with local governments to develop comprehensive locally driven economic development strategies. Through this established network, NADO members directly represent 1,800 counties and more than 15,000 cities, towns, and villages. The NADO Research Foundation, established in 1988, provides research, education, and training to community and economic development practitioners and policymakers. The Foundation identifies issues and develops training strategies to help professionals and local elected officials.

The Economic Development Finance Service (EDFS), a program of the NADO Research Foundation, is the only national organization for business development loan funds that has a rural perspective. EDFS provides information, training, technical assistance, a professional network, and representation through NADO primarily to rural and small metropolitan loan funds and other professionals and policymakers.

In light of the findings of this survey, NADO urges the CDFI Fund to revise the eligibility criteria established in the Riegle Community Development and Regulatory Improvement Act of 1994 to include public entities that meet the other program criteria. NADO would like to work with the CDFI Fund to modify the Reigle legislation to ensure that rural America is able to access all of the resources available for economic development.

NADO appreciates the opportunity to provide you with our findings and we hope they will be a catalyst for expanding the coverage of the CDFI Fund in rural America. We look forward to meeting with CDFI Fund staff to discuss this further. For additional information, please contact William Amt at 202-624-8467 or bamt@nado.org.

Sincerely,
Aliceann Wohlbruck
Executive Director

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