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Trump proposes 5 percent budget cut for SBAImpact on midstate lending likely minimal, banker says

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President Donald Trump's preliminary 2018 budget proposal slashes programs throughout most government departments, and the Small Business Administration is no exception. He would like to see the administration operate on a budget of $826.5 million next year, a 5 percent, or $43.2 million, cut from 2017.

About $12 million in those costs-savings would come from eliminating programs Trump's administration feels could efficiently be handled by the private sector. That includes the SBA's PRIME technical assistance grants, Regional Innovation Clusters and Growth Accelerators.

The proposal also bumps down the dollar amount of loan guarantees supported through the program from $46 billion to $45 billion.

The three specific programs Trump would like to cut have had little impact on the midstate in recent years. The state has no Regional Innovation Clusters, according to the SBA's website, and Pennsylvania's PRIME grantees have resided mostly in the Pittsburgh and Philadelphia areas. One midstate group - the Benjamin Franklin Techcelerator - has received growth accelerator funds in the program's three-year history.

But other aspects of the SBA do have a significant impact on local businesses and lenders.

The administration funds a range of entrepreneurial development programs, including Small Business Development Centers sponsored by Shippensburg and Kutztown universities throughout the midstate. It also pays for business ownership mentoring at Women's Business Centers, one of which operates out of ASSETS in Lancaster, and through local chapters of the Service Corps of Retired Executives.

Perhaps its most wide-reaching impact in the midstate, however, is its 7(a) Loan Guarantee Program, which helps connect business owners with loans for which they may not otherwise qualify. The SBA's Central Pennsylvania Region backed a record number of dollars through the program last year.

Millersburg-based Mid Penn Bank, for example, made 30 7(a) loans worth a total of $8.3 million last year, ranking 10th in the region in terms of loan volume, according to the SBA. 

Scott Micklewright, the bank's chief lending officer, is not too concerned about the budget cuts hurting Mid Penn's growing SBA program if they go through. Although the concept of cutting funds for small business owners is not necessarily a welcomed one, this particular proposal should have little effect on the bank's ability to lend.

"It's not a great thing, but on the other side, they're looking at really only a 5 percent (cut), so I don't see that as having much of an impact on us," he said.

Most of the SBA's core functions, in fact, would remain in place under Trump's proposal. Here is how his administration outlined its hopes for the SBA:

The Small Business Administration (SBA) ensures that small businesses have the tools and resources needed to start and develop their operations, drive U.S. competitiveness, and help grow the economy. The President is committed to assisting small businesses succeed through reducing the regulatory and tax burdens that can impede the development of small firms.The Budget increases efficiency through responsible reductions to redundant programs and by eliminating programs that deliver services better provided by the private sector.The President’s 2018 Budget requests $826.5 million for SBA, a $43.2 million or 5.0 percent decrease from the 2017 annualized CR level.The President’s 2018 Budget:

  • Supports more than $45 billion in loan guarantees to assist America’s small business owners with access to affordable capital to start or expand their businesses.
  • Strengthens SBA’s outreach center programs by reducing duplicative services, coordinating best practices, and investing in communities that would benefit from SBA’s business center support. As a result, SBA would be better positioned to strengthen local partnerships and more efficiently serve program participants while achieving savings over the 2017 annualized CR level.
  • Supports over $1 billion in disaster relief lending to businesses, homeowners, renters, and property owners to help American communities recover quickly in the wake of declared disasters.
  • Through the disaster loan program, SBA is able to provide affordable, accessible, and immediate direct assistance to those hardest hit when disaster strikes.
  • Achieves $12 million in cost savings from the 2017 annualized CR level through identifying and eliminating those SBA grant programs where the private sector provides effective mechanisms to foster local business development and investment.
  • Eliminations include PRIME technical assistance grants, Regional Innovation Clusters, and Growth Accelerators.
  • Provides training and support services for transitioning service members and veterans to promote entrepreneurship and business ownership.
  • These programs help to fulfill the President’s commitment to support the Nation’s veterans by providing business counseling, lending, and contracting assistance.
  • Maintains $28 million in microloan financing and technical assistance to help serve, strengthen, and sustain the smallest of small businesses and startups.
  • Allows SBA to advocate and assist small businesses in accessing Federal contracts and small business research opportunities government-wide.

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Jennifer Wentz

Jennifer Wentz

Jennifer Wentz covers Cumberland County, York County, financial services and taxation. Have a tip or question for her? Email her at jenniferw@cpbj.com. Follow her on Twitter, @jenni_wentz.

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DC March 17, 2017 10:48 am

Finally, we have a president who understands that the US cannot continue to borrow or just print money. Well done President Trump!

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