Small Business Reilef Efforts

Small businesses provide more than half of existing private sector jobs, two-thirds of new private sector jobs, and more than half of the United States’ Gross Domestic Product. The Small Business Administration’s (SBA’s) mission is to promote small business development and entrepreneurship through business financing and technical assistance programs. SBA also works with other Federal agencies to reduce regulatory and paperwork burdens on small businesses.

In addition to SBA’s programs, the Administration is championing small business interests through tax cuts and health care reform. The President’s jobs and growth agenda is creating the right economic conditions to encourage innovation and growth by small businesses. The Administration has taken important steps to assist small businesses and the people they employ by reducing taxes, encouraging investment, and removing obstacles to growth.

As a result of the Jobs and Growth Tax Relief Reconciliation Act of 2003, 25 million small businesses and their owners received tax relief averaging more than $3,235 each in 2005. The lower marginal income tax rates have assisted more than 90 percent of small businesses that pay taxes at the individual income tax rates.

Recently enacted free trade agreements help small and medium-sized businesses (those with fewer than 500 employees) sell their products to the world, as these entities represent 97 percent of all exporters.

Continuing regulatory relief efforts ensure that Federal regulations do not unduly handicap America’s entrepreneurs. Regulatory and paperwork requirements can be especially burdensome on small businesses. An SBA study found that small businesses with fewer than 20 employees spend an average of $7,647 per employee complying with regulations as compared to $5,282 per employee for firms with 500 or more employees. SBA works with Federal agencies to minimize the burden of new regulations. As a result of the Administration’s efforts since 2001, SBA estimates that small businesses have been spared over $41 billion in regulatory costs by filtering out unnecessary, over-burdensome, or duplicative requirements prior to finalizing new regulations. In 2007, SBA efforts are expected to save $6.16 billion in forgone regulatory costs.

The Administration also supports legislation enabling creation of Association Health Plans, which will allow small businesses to band together and purchase insurance at lower rates, and making insurance premiums associated with Health Savings Accounts tax deductible. In addition, the proposed comprehensive reform of the Nation’s medical liability laws will make insurance costs more affordable and reasonable for small businesses.

To meet the demand of the growing small business sector, the Budget supports $28 billion in small business lending. SBA’s 7(a) program, which received an Adequate rating under the Program Assessment Rating Tool, is being increased to support $17.5 billion in guaranteed loan volume in 2007, the largest level in the history of the program. This will provide financing to entrepreneurs who could not obtain affordable loans without a Federal Government guarantee. SBA’s Section 504 loan program will support an additional $7.5 billion in guaranteed loans for fixed-rate financing of fixed assets such as land, equipment, and buildings. SBA will also supplement the capital of Small Business Investment Companies with $3 billion in guaranteed long-term loans for venture capital investments in small businesses.

SBA and its partners provide technical assistance programs, including training, counseling, mentoring, and information services to more than four million existing and potential entrepreneurs annually. SBA provides grants to a network of over 950 Small Business Development Centers; 389 SCORE chapters, which match executives with entrepreneurs for business counseling; and over 80 Women’s Business Centers. The Budget requests $104 million for technical assistance programs in 2007.

The 2007 Budget proposes to continue providing preferential loan terms to victims of disasters. However, to contain the escalating costs of the loans, the Budget proposes to adopt graduated interest rates for the Disaster Loan program beginning with disaster events occurring in 2007. During the first five years after a disaster, interest rates will remain deeply subsidized, as they are currently structured, although interest rate caps would be eliminated. Thereafter, rates would graduate to those of a comparable-maturity Treasury instrument. This structure would continue to provide borrowers with deep interest subsidies when they need them most—immediately after a disaster—and after five years the subsidies would be reduced for the remainder of the loan period. This proposal would not affect loans made for recovery from disasters occurring before 2007.