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Hi, I’m Chris Hurn, the CEO and co-founder of Mercantile Capital Corporation. This week’s
video blog is going to be part one of two parts. Actually, I was about to film this
yesterday. It’s a good thing I didn’t because late yesterday afternoon, at about
3:30 EST, the SBA finally came out with its 504 refinance regulations. We are going to
address all of that in part two so you definitely want to watch that as well. But today, we
are going to talk about what has been a very busy week for the SBA. On Monday, the president
actually released his new budget and in there he detailed what they characterized as 45%
cuts in the SBA’s budget. Obviously, in Washington these days, it is more politically
expedient to sounds like a “cutter” of spending as opposed to a “spender” of
spending. What I told two reporters Tuesday morning, the day after the budget was released,
was that it is not nearly as bad as some of the media has made it out to be. I want you
to be well informed. I think it’s important to deal with the truth and I’m going to
tell you the truth about the SBA’s budget.
It is important to keep in mind that in the last couple years there was a tremendous amount
of supplemental appropriations that were made for the SBA’s part of the stimulus bill.
If you cut back things like, the thing I have not been a fan of from day one, the disastrous
ARC loan program, which was America’s recovery capital program, which was 256 million dollars.
If you take into account the fee abatement program with the 7(a) and the 504, which I
was also not a big fan of because little do the people seemingly know on Capitol Hill,
all of those SBA fees were always financed into SBA loans, they weren’t out of pocket
costs to a small business owner so it didn’t make a huge impact. Sure, maybe you saved
$15000, $20000, $30000 over the life of an SBA loan but that wasn’t like it was coming
out of the borrowers’ pocket. Then you add in the increase of the SBA’s flagship program,
the 7(a), from a 75% government guarantee up to a 90% guarantee. All those things have
burned off at this point and if you take those out you will see the SBA’s overall budget
does not go down that much at all.
Now, having said that, I am not a fan to say that somehow there should be agencies of the
government that are off limits to cuts because I think everybody needs some belt tightening.
The federal government has ballooned. I think I saw something like 93% in the last eight
or nine years; that’s dramatic. I don’t think anything else in the economy has kept
up with that; college tuition might be the one exception. The bottom line is we’ve
got to get our house in order and it starts with every division of government; the SBA
is not alone. Having said that, the SBA is the only governmental body that is there for
America’s small businesses and entrepreneurs. Going by the last 10 or even 15 years worth
of SBA budget increases or decreases, had the federal government been on that, I venture
to say that we would probably almost have a surplus right now. The SBA has been under-funded
for many years in many ways and it is actually been a very efficient agency of the government.
I like to think of it as an agency that does more with less all the time. If we had more
areas of the government that were doing that, I think you’d find we would all be happier,
we wouldn’t have nearly the kind of budget deficits that we do, and we would be very
pleased with Washington as unlike today.
Now, some of the other areas of it: The SBDC (Small Business Development Centers) there
are nine hundred of them in the country, are going to be cut about 10 million dollars,
the micro loans get cut- just various little things like that. In general, we may have
saved a fighter jet or two by some of the cuts in the SBA’s budget but it’s not
this dramatic slashing and chopping that some of the media would have you believe, or even
the administration would have you believe. There is 16 ½ billion for the flagship SBA
7(a) program, that’s the SBA’s working capital program for the next fiscal year.
That is where it was this year and they didn’t even get to those levels when you had some
dramatic increases in 7(a) lending because of the fee abatement and the increase guarantees;
I think we have plenty of money in that. We have 7 ½ billion dollars in the SBA 504 program;
that is what has been proposed. That has also been there for the last three or four years.
We haven’t quite gotten to the 7 ½ billion dollar mark so I think we have plenty of money
there. That will actually help us probably do about 16 billion dollars if we were to
use it all up. These are the government guaranteed second mortgages. That is what we specialize
in doing along with CDC’s around the country. If we use all that it is about 16 billion
dollars in total project costs so there is plenty of money in the SBA’s budget. It
is not getting cut like some people will have you believe. I think it is important that
you, the viewer, should understand that and should be well informed.
Hopefully some of the budget cutting will continue in Washington in other areas. I could
probably solve social security just like that, just like you could. But somebody in Washington
has to be courageous enough to do it and take on the entitlements. The entitlements are
where it’s at. We have to focus on the entitlements; that is where the cutting is going to come.
It is not going to be doing the window dressing, the little tweaks, and things like that on
a little insignificant budget like the SBA. It is a very small piece of the federal government.
That’s it. I hope you will stay tuned and watch part 2 of this and I’ll tell you all
about the new 504 refinance regulations and how that can benefit your business. Thank
you for watching.