The U.S. Small Business Administration (SBA) began its fiscal year operating on a Continuing Budget Resolution that imposed short-term budget constraints. On February 25, 2003, President Bush signed a bill that not only increased the SBA Loan Budget by 130%, but also allowed it to remove the $500,000 cap on its popular 7(a) loan program.

In fact, there were three separate bills that were introduced and passed regarding the SBA budget:

1. To set the amount of budget funds for the 2003 fiscal year
2. To approve a new loan model for determining the cost of the 7(a) loan program
3. To roll-over funds for STAR (Supplemental Terrorist Activity Relief)

Due to delays in approval of the federal budget, the SBA was concerned with diminishing available funds, which forced them to place a loan limit of $500,000 on its 7(a) loan program. With the completion of the three bills signed by the President, the SBA budget was restored which allowed the SBA to return the 7(a) loan limit back to the prior maximum amount of $2,000,000, effective immediately.

The 7(a) Loan Guaranty Program is one of SBA's primary lending programs. The 7(a) loan program allows the bank to make a loan to a small business with the federal government providing the lender a 75% to 85% guaranty. That guaranty allows the bank to step in and make loans on reasonable terms that otherwise would not be available.

The SBA has developed a new econometric model designed to improve the accuracy of projecting the cost of the 7(a) General Business Loan Program. The model will enable the SBA to allocate its resources more effectively, determine program risk more precisely, and increase its ability to target loans to aspiring entrepreneurs who cannot obtain financing without a government guaranty. With this new model, the SBA was able to stretch its budget dollars further, which increased lending authority. The revised model, in combination with appropriation levels provided in the fiscal 2003 budget, allows SBA officials to approve up to $9.4 billion in 7(a) loan guarantees during the current year.

The STAR loan program was initially a disaster recovery assistance loan program for businesses economically harmed or disrupted as a result of September 11, 2001 events. The STAR program was designed as an alternative for small businesses that had been adversely affected by the terrorist attacks, but have not been able to qualify for other, more restrictive loan programs.

The STAR funds, now combined with the general budget, brings available guaranteed funds up to $11.3 billion from $4.8 billion. That's an increase of 130%!

When a small business applies to a lending partner for a loan, the lender reviews the application and decides if it merits a loan on its own or if it requires additional support in the form of an SBA guaranty. The lender then requests SBA backing on the loan. Due to its experience with the SBA loan program, Bridge Bank is designated a Preferred SBA Lender which means that we approve the loan on behalf of the SBA. This delegated authority provides Bridge Bank the ability to fund a loan 3 - 4 weeks sooner than a non-preferred lender. In guaranteeing the loan, the SBA assures the lender that, in the event the borrower does not repay the loan, the government will reimburse the lending partner for a portion of its loss.

By providing this guaranty, the SBA is able to help tens of thousands of small businesses every year get financing they would not otherwise obtain.

To qualify for an SBA guaranty, a small business must meet SBA's size and underwriting criteria, and the lender must certify that it could not provide funding on reasonable terms without an SBA guaranty. However, based on the small business' financing needs, such as a desire to preserve its capital and therefore require leveraged financing, it is estimated that approximately 90% of the businesses in the United States can qualify for an SBA guaranteed loan.