SMALL BUSINESS ADMINISTRATION

Transcription

1 SMALL BUSINESS ADMINISTRATION General and special funds: Federal Funds SALARIES AND EXPENSES For necessary expenses of the Small Business Administration as authorized by Public Law , including hire of passenger motor vehicles (31 U.S.C and 1344), and not to exceed $3,500 for official reception and representation expenses, $235,401,000: Provided, That the Administration is authorized to charge fees to cover the cost of publications developed by the Small Business Administration, and certain loan servicing activities: Provided further, That notwithstanding 31 U.S.C. 3302, revenues received from all such activities shall be credited to this account, to be available for carrying out these purposes without further appropriations. Note. A regular 1996 appropriation for this account had not been enacted at the time this budget was prepared. The 1996 amounts included in this budget are based on the levels provided in three continuing resolutions: P.L , P.L , and P.L Identification code actual 1996 est est Government Contracting and Minority Enterprise Development Disaster assistance Economic development Management and administration Executive direction General Counsel Congressional and legislative affairs Hearings and appeals Communications and Publications Advocacy Field Operations Equal Employment Opportunity and Civil Rights Compliance Regional and District Offices Chief Financial Office Field Support Total obligations Unobligated balance available, start of year: Uninvested balance New budget authority (gross) Unobligated balance expiring Total budgetary resources available for obligation New obligations Unobligated balance available, end of year: Uninvested balance Current: Appropriation Procurement reduction pursuant to P.L. 103 [317] Appropriation (total) Permanent: Spending authority from offsetting collections: Offsetting collections (cash) Total new budget authority (gross) Unpaid obligations, start of year: Obligated balance: Appropriation New obligations Total outlays (gross) Unpaid obligations, end of year: Obligated balance: Appropriation Outlays from new current authority Outlays from current balances Outlays from new permanent authority Total outlays (gross) Against gross budget authority and outlays: Federal sources: Payments from business loan program account Payments for disaster loan program account Non-Federal sources Total, offsetting collections (cash) Budget authority Outlays This appropriation funds salaries, other administrative expenses of the Small Business Administration (SBA), and business education and training programs. The SBA provides assistance to small businesses and to victims of natural disasters through these primary program areas: Economic Development. The Associate Deputy Administrator for this function exercises direction over the following SBA program offices: Financial Assistance; Surety Bond Guarantees; Investment; International Trade; Women s Business Ownership; Small Business Development Centers; Veterans Affairs; Native-American Affairs; and Business Initiatives, which includes the Service Corps of Retired Executives. These offices are responsible for the administration of all SBA credit and business education training programs. In 1997, SBA plans to continue providing business management training and tools for the small business community through U.S. Export Assistance Centers, Empowerment Zone One-Stop- Capital Shops, and Business Information Centers. In addition, through new programs such as LowDoc, FASTRAK, and the Export Working Capital Programs (EWCP), SBA has begun targeting financial assistance to segments of the population that have historically been under represented in SBA s credit programs. The SBA s efforts to reduce unnecessary paperwork and make the agency more customer-friendly has attracted new banks interested in establishing partnerships with SBA. Government Contracting and Minority Enterprise Development. The Associate Deputy Administrator for this function exercises direction over the following SBA program offices: Government Contracting; Minority Enterprise Development; Technology; and Size Standards. These offices are responsible for effectively advocating for small businesses in the area of government contracting. Government Contracting activities are aimed at ensuring that small businesses receive a fair share of government contracts. The Minority Enterprise Development programs provide assistance to minority small business concerns, primarily in the area of Federal procurement. Through this office, SBA assists in the establishment or expansion of firms that are owned by minority or other disadvantaged business persons and have the potential to develop into viable competitive businesses in a reasonable period of time. The Minority Enterprise Development office also evaluates the overall agency performance in promoting minority business development. Disaster Assistance. The Associate Administrator for the Office of Disaster Assistance oversees the Disaster Loan Program which provides physical disaster loans to individuals and businesses of any size, and economic injury loans to small 925

2 926 Federal Funds Continued THE BUDGET FOR FISCAL YEAR 1997 General and special funds Continued SALARIES AND EXPENSES Continued businesses unable to obtain credit elsewhere. In addition to Presidentially-declared disasters, the program provides loans when a declaration is made by the SBA Administrator. Program eligibility is based on financial criteria and interest rates are set according to statutory formulas. In recent years, the average interest rate on disaster loans has been about four percent. The budget proposes to reduce the cost of disaster loan subsidies by increasing the interest rate on disaster loans to the Treasury s cost of borrowing. Advocacy. The Chief Counsel for Advocacy acts as a voice for small business within the government. Activities include the representation of small business interests, the analysis of the effects of federal law and regulation on small business, the development and utilization of a small business database to aid in this analysis, and liaison with small business and small business organizations and the public. Business Education and Training. This appropriation also provides program funds for SBA activities involving business education and training. These programs exist to help entrepreneurs start businesses, stay in business, and grow their businesses. Through one of the widest outreach networks of the Federal government, SBA provides management, technical, and research assistance along with education, training, and information to perspective and existing small business owner/operators. Data substantiating the benefits produced by the agency s business education and training programs are becoming more readily available. A number of assessments have shown that counseling helps small businesses. Synopses of two such studies are presented below along with program accomplishments. Program Performance: Small Business Development Centers (SBDCs). The SBDCs provide long term counseling to small businesses at 976 locations in 50 states. In FY 1995, nearly 600,000 customers were helped. Roughly 40 percent of customers are women and 17 percent minorities. A national study compared the performance improvements of long-term recipients of counseling at 47 SBDCs to the performance of all businesses in the participating states. The SBDC assistance resulted in approximately $5 in tax revenues for every $1 spent on the program. Tax revenues exceeded the direct cost of the counseling provided to long-term customers by 15 to 1. For FY 1997, as part of the Administration s Reinventing Government II initiative, the agency is proposing to incorporate a portion of the 7(j) Technical Assistance Program and the Women s Demonstration Project into this business education and training program. For FY 1997, the budget proposes a funding level of $72.3 million for the enhanced SBDC program. Service Corps of Retired Executives (SCORE). Through one-on-one counseling and workshops SCORE reaches about 350,000 business owners annually using approximately 13,000 counselors in 700 locations. Counseling costs to the Government are less than $3 per hour. For 1997, the budget proposes a funding level of $3.3 million for this program. Outreach Initiatives. The SBA is actively involved in fostering the development of entrepreneurial skills and economic development opportunities involving veterans, women and businesses engaged in international trade. The budget proposes a 1997 funding level of $1.1 million to support veterans, women, and international trade outreach initiatives. One-Stop-Capital Shops (OSCS). One-stop-capital shops are located in urban and rural areas which have been designated as Empowerment Zones. The program and policy objectives of this program are to increase access to capital in economically-distressed areas and to provide systematical comprehensive business development assistance (i.e., technical, managerial, and financial assistance). Under this new program, SBA will be establishing up to fifteen (15) OSCSs during in Empowerment Zones designated by HUD and USDA. In addition to these sites, the SBA will be participating in the creation of several other OSCSs in similarly distressed Enterprise Communities. For 1997, the budget proposes $2.7 million to support this initiative. Business Information Centers (BIC). In addition to the self-help hardware, software and reference materials, BICs deliver on-site counseling provided by SCORE volunteers. Individuals who are in business or are interested in starting a business will find many resources specifically targeted at helping businesses grow or find new market niches. For 1997, the budget proposes $485 thousand for this program. Native American Affairs. This program supports the economic development needs of reservation communities. In FY 1995, over 400 loans were made to Native Americans under the agency s 7(a) program, amounting to nearly $60 million. Native American firms also made up 7 percent of total contracted dollars of SBA s section 8(a) portfolio in Business Assistance Publications. The SBA provides publications on a self-funding basis and distributes an estimated 300,000 items to the public each year. Other Services. The SBA co-sponsors a variety of special activities with the for-profit, not-for-profit, and public sectors. Many co-sponsored events cost customers between $35 and $100, with comparable commercially-sponsored training costing $300 to $800. Among the most visible public/private cosponsorships undertaken is SBA Online, SBA s electronic bulletin board for small businesses. The SBA Online system has been principally underwritten by Sprint, which has paid the cost of all toll-free connections to the system. Between October 1992 and January 1995, more than one million connections to SBA Online were logged, and more than 120,000 individuals used the system on a regular basis. Program Performance and Policy Goals. SBA has the following program performance and policy goals: 1) provide small businesses with user-friendly access to information, technical and management counseling, and technical assistance and training; 2) design and deliver cost-effective programs that meet the needs of small businesses; 3) align business education programs more closely with financial assistance in a manner that maximizes benefits to customers who obtain SBA guaranteed loans; and 4) expand the use of SCORE volunteers to provide counseling and training on the entire range of SBA programs and services. Performance Indicators. A true assessment of program effectiveness is a long-term process and there is much to learn about what types of programs contribute to cost-effective business assistance. In the short term, SBA is committed to survey customer satisfaction levels from customers who use its services. In the long run, the agency s performance goal is true economic development and the capacity to assess how SBA business development assistance has contributed to the economy. Performance measures that will be used in 1997 to assess progress in achieving the above goals follow. Outputs Number of businesses counseled or trained by SCORE volunteers. Quality public-private cooperative agreements. Increased information available on-line More resource centers, including a BIC in each SBA district, SBDC women s business subcenters, and new Tribal BICs. Intermediate Outcomes Increased customer satisfaction with services Increased customer access to services, increased focus of specialized programs, and increased leverage of Federal spending Increased use of services, lower delivery costs, better and more varied information supplied to small business owners Increased access by current and potential small business owners to SBA programs and information

3 SMALL BUSINESS ADMINISTRATION Federal Funds Continued 927 Programs targeted toward increasing small businesses owned by veterans, women, and Native Americans. Increased successful participation of members of these groups in the small business community 1997 Proposals. For agency operating expenses, the budget proposes to continue SBA s efforts to increase administrative efficiencies and enhance the delivery of its programs. Although the agency s programs have grown substantially in recent years, SBA s administrative budget has been able to decline gradually as efficiencies have been realized. Total employment at the agency, excluding disaster-funded positions, which fluctuate with the incidence of natural disaster activity, has been reduced by more than 13 percent since the end of FY Object Classification (in millions of dollars) Identification code actual 1996 est est. Personnel compensation: 11.1 Full-time permanent Other than full-time permanent Other personnel compensation Total personnel compensation Civilian personnel benefits Travel and transportation of persons Rental payments to GSA Communications, utilities, and miscellaneous charges Printing and reproduction Other services Supplies and materials Equipment Grants, subsidies, and contributions Undistributed (disaster assistance) Total obligations Personnel Summary Identification code actual 1996 est est. Total compensable workyears: 1001 Full-time equivalent employment... 5,562 4,178 4, Full-time equivalent of overtime and holiday hours Note. The personnel summary includes regular (non-disaster) full-time equivalents (FTEs) of 3,267, 3,094, and 3,122 in 1995, 1996, and 1997, respectively. OFFICE OF INSPECTOR GENERAL For necessary expenses of the Office of the Inspector General in carrying out the Inspector General Act of 1978, as amended (5 U.S.C. App. 1 11, as amended by Public Law ), $9, Note. A regular 1996 appropriation for this account had not been enacted at the time this budget was prepared. The 1996 amounts included in this budget are based on the levels provided in three continuing resolutions: P.L , P.L , and P.L Identification code actual 1996 est est Management and counsel Audit Investigations Disaster Total obligations Unobligated balance available, start of year: Uninvested balance New budget authority (gross) Total budgetary resources available for obligation New obligations Unobligated balance available, end of year: Uninvested balance Appropriation Unpaid obligations, start of year: Obligated balance: Appropriation New obligations Total outlays (gross) Unpaid obligations, end of year: Obligated balance: Appropriation Outlays from new current authority Outlays from current balances Total outlays (gross) Budget authority Outlays This appropriation provides funds for agency-wide audit, investigative, and inspection/evaluative functions to identify and recommend corrections of management or program deficiencies which may create conditions for fraud, waste, or abuse. The audit function provides internal audit, external audit, and inspection/evaluation oversight activities. Internal audits assess the general management and efficiency of SBA program operations; external audits review all program participants and their compliance with SBA regulations and procedural requirements; and inspection/evaluations address specific requirements of program management and effectiveness. The investigative function detects and investigates allegations of illegal and improper activities involving agency personnel, programs, and operations. Object Classification (in millions of dollars) Identification code actual 1996 est est Personnel compensation: Full-time permanent Civilian personnel benefits Undistributed Total obligations Personnel Summary Identification code actual 1996 est est Total compensable workyears: Full-time equivalent employment Public enterprise funds: SURETY BOND GUARANTEES REVOLVING FUND For additional capital for the Surety Bond Guarantees Revolving Fund, authorized by the Small Business Investment Act, as amended, $3,730,000, to remain available without fiscal year limitation as authorized by 15 U.S.C. 631 note. Note. A regular 1996 appropriation for this account had not been enacted at the time this budget was prepared. The 1996 amounts included in this budget are based on the levels provided in three continuing resolutions: P.L , P.L , and P.L Identification code actual 1996 est est Total obligations (object class 42.0) Unobligated balance available, start of year: Fund balance New budget authority (gross) Total budgetary resources available for obligation New obligations Unobligated balance available, end of year: Fund balance

4 928 Federal Funds Continued THE BUDGET FOR FISCAL YEAR 1997 Public enterprise funds Continued SURETY BOND GUARANTEES REVOLVING FUND Continued Continued Identification code actual 1996 est est. Current: Appropriation Permanent: Spending authority from offsetting collections: Offsetting collections (cash) Total new budget authority (gross) Unpaid obligations, start of year: Obligated balance: Fund balance New obligations Total outlays (gross) Unpaid obligations, end of year: Obligated balance: Fund balance Outlays from new current authority Outlays from current balances Outlays from new permanent authority Total outlays (gross) Against gross budget authority and outlays: Non-Federal sources Budget authority Outlays Under this program, the Small Business Administration guarantees a portion of the losses sustained by a surety company as a result of the issuance of a bid, payment, and/ or performance bond to a small business concern. In 1997, the budget proposes a program level anticipated to accommodate expected demand from the preferred surety bond program authorized in P.L The SBA will continue to rely on both preferred and prior approval sureties to deliver this program, with SBA oversight. Statement of Operations (in millions of dollars) Identification code actual 1995 actual 1996 est est Revenue Expense Net loss Identification code actual 1995 actual 1996 est est Federal assets: Fund balances with Treasury Non-Federal assets: Receivables, net Total assets Non-Federal liabilities: Accounts payable Total liabilities NET POSITION: 3100 Appropriated capital Cumulative results of operations Total net position Total liabilities and net position Credit accounts: BUSINESS LOAN PROGRAM ACCOUNT For the cost of direct loans, $2,792,000, and for the cost of guaranteed loans. $318,580,000, as authorized by 15 U.S.C. 631 note, of which $2,317,000, to be available until expended, shall be for the Microloan Guarantee Program, and of which $21,733,000 for the Small Business Investment Company Debentures Program and the Small Business Investment Company Participating Securities Program, shall remain available until September 30, 1998: Provided, That such costs including the costs of modifying such loans, shall be as defined in section 502 of the Congressional Budget Act of 1974: Provided further, That during fiscal year 1997, commitments to guarantee loans under section 503 of the Small Business Investment Act of 1958, as amended, shall not exceed the amount of financings authorized under section 20(n)(2)(B) of the Small Business Act, as amended. In addition, for administrative expenses to carry out the direct and guaranteed loan programs, $94,090,000, which may be transferred to and merged with the appropriations for Salaries and Expenses. Note. A regular 1996 appropriation for this account had not been enacted at the time this budget was prepared. The 1996 amounts included in this budget are based on the levels provided in three continuing resolutions: P.L , P.L , and P.L Unavailable Collections (in millions of dollars) Identification code actual 1996 est est. Balance, start of year: Balance, start of year Receipts: Business loan program downward reestimate of subsidy Total: Balances and collections Total balance, end of year Identification code actual 1996 est est Direct loan subsidy Guaranteed loan subsidy Section 503 prepayments Grants Reestimate of loan guarantee subsidy Interest on reestimates of loan guarantee subsidy Administrative expenses Total obligations Unobligated balance available, start of year: Fund balance New budget authority (gross) Total budgetary resources available for obligation New obligations Unobligated balance available, end of year: Fund balance Current: Appropriation Appropriation (indefinite) Appropriation (total) Permanent: Appropriation (indefinite) Spending authority from offsetting collections: Offsetting collections (cash) Total new budget authority (gross) Unpaid obligations, start of year: Obligated balance: Appropriation New obligations Total outlays (gross) Unpaid obligations, end of year: Obligated balance: Appropriation

5 SMALL BUSINESS ADMINISTRATION Federal Funds Continued Outlays from new current authority Outlays from current balances Outlays from new permanent authority Total outlays (gross) Against gross budget authority and outlays: Federal sources Budget authority Outlays Summary of Loan Levels, Subsidy Budget Authority and Outlays by Program (in millions of dollars) Identification code actual 1996 est est. Direct loan levels supportable by subsidy budget authority: 1150 Handicapped loans Specialized SBIC loans Micro loans Total direct loan levels Direct loan subsidy (in percent): 1320 Handicapped loans Specialized SBIC loans Micro loans Weighted average subsidy rate Direct loan subsidy budget authority: 1330 Handicapped loans Specialized SBIC loans Micro loans Total subsidy budget authority Direct loan subsidy outlays: 1340 Handicapped loans Specialized SBIC loans Micro loans Total subsidy outlays Guaranteed loan levels supportable by subsidy budget authority: 2150 General business 7(a) (incl. DELTA)... 7,791 11,046 11, Section 502 development company loans Section 504 (including DELTA)... 1,528 2, SBIC debenture guarantees SBIC participating security guarantees Specialized SBIC guarantees Micro loan guarantees Total loan guarantee levels... 9,709 14,255 11,468 Guaranteed loan subsidy (in percent): 2320 General Business 7(a) Section 502 development company loans Section 504 (including DELTA) SBIC debenture guarantees SBIC participating security guarantees Specialized SBIC guarantees Micro loan guarantees Weighted average subsidy rate Guaranteed loan subsidy budget authority: 2330 General business 7(a) Section 502 development company loans Section 504 (including DELTA) SBIC debenture guarantees SBIC participating securities guarantees Specialized SBIC guarantees Micro loan guarantees Total subsidy budget authority Guaranteed loan subsidy outlays: 2340 General business 7(a) (incl. DELTA) Section 502 development company loans Section 504 (including DELTA) SBIC debenture guarantees SBIC participating securities guarantees Specialized SBIC guarantees Micro loan guarantees Total subsidy outlays SMALL BUSINESS ADMINISTRATION S SHARE OF DIRECT LOAN LEVELS [In millions of dollars] 1995 actual 1996 est est. Handicapped loans Section 504 loans ,650 Specialized SBIC loans Micro loans Total direct loans ,684 SMALL BUSINESS ADMINISTRATION S SHARE OF GUARANTEED LOAN LEVELS [In millions of dollars] 1995 actual 1996 est est. General business loans... 6,132 8,395 8,520 Development company loans (Section 502) Development company loans (Section 504)... 1,528 2,825 0 SBIC debenture guarantees SBIC participating security guarantees Specialized SBIC loans Micro loan guarantees Total guaranteed loans... 8,050 11,604 9,172 As required by the Federal Credit Reform Act of 1990, this account records, for this program, the subsidy costs associated with the direct loans obligated and loan guarantees committed in 1992 and beyond (including modifications of direct loans or loan guarantees that resulted from obligations or commitments in any year), as well as administrative expenses of this program. The subsidy amounts are estimated on a present value basis; the administrative expenses are estimated on a cash basis. General Business Assistance. The Small Business Administration guarantees loans under its section 7(a) General Business Loan program to small businesses that are unable to obtain private financing. These loans must be of such value or so secured as to reasonably assure repayment. No loan may be made unless the financial assistance is not otherwise available on reasonable terms. Under the guarantee plan, the SBA agrees to purchase the guaranteed portion of the loan only upon default. Investment Company Assistance. A primary function of small business investment companies is to provide a source of equity capital or long-term loans to new or expanding small businesses. The Small Business Investment Act, as amended, authorizes the SBA to guarantee the timely payment of all principal and interest, as scheduled, on debentures issued by such companies. In addition, since 1994, the SBA has guaranteed the performance of participating securities issued by these companies. Development Company Assistance. Under the Small Business Investment Act, the SBA makes loans through State and local development companies to small businesses. Through these programs, the SBA promotes economic development and job creation and maintenance by stimulating the flow of long-term financing to small business concerns for projects that involve fixed assets. These projects are designed to create or retain a meaningful number of jobs in the communities affected, with a special emphasis on distressed areas. Approximately 154,000 jobs were created or maintained through the $1.5 billion in loans guaranteed under the Development Company programs in Program Performance: Program performance and policy goals. SBA has the following program performance and policy goals: 1) effectively intervene in the economy to correct capital market imperfections; 2) encourage small business lending and surety bonding that results in higher employment and GDP growth; 3) promote capital access for traditionally under-served small business markets and geographic regions, e.g., women, minorities,

6 930 Federal Funds Continued THE BUDGET FOR FISCAL YEAR 1997 Credit accounts Continued BUSINESS LOAN PROGRAM ACCOUNT Continued small exporters, inner-cities and rural areas; and 4) maintain a high quality portfolio. Performance Indicators. During the past two years SBA has focused on quantitative, measureable lending goals for underserved segments of the small business market in each district, e.g., minorities, women, and small exporters. The SBA began this process in 1994 when it established internal performance agreements that contained two-year lending goals. Using goal monitoring, the agency is able to track on a regular basis the status of each district office s progress in meeting these goals. Appropriate finance program effectiveness assessment involves the consideration of a number of indicators. First, effectiveness can be assessed by loan-making activity levels the number and dollar amount of loans guaranteed by SBA. Second, effectiveness can be measured by the health of the loan portfolio its currency and default figures, and the agency s ultimate record on loan recovery. Beyond these very tangible indicators of success are the more difficult-to-measure indicators. These include such things as the economic benefits that accrue to the small business, its employees, and the community in which it is located. The number and dollar volume of loans made under the section 7(a) loan program has increased dramatically in recent years. In 1991, SBA made or guaranteed approximately 9,000 loans totaling about $4 billion. By 1995, those figures had risen to approximately 56,000 loans totaling about $8 billion, and these figures could have been even higher if additional lending authority had been available. The section 504 program has also shown impressive growth. In 1991, the SBA provided about 1,400 financings totaling nearly $400 million. By 1995, those figures had increased to about 4,500 financings for $1.5 billion. Performance measures to be used in 1997 to assess progress in achieving the above goals follow. Outputs Loans guaranteed number and dollar amount. Private investment leveraged dollar amount. Better credit instruments developed number. Focused lending for underserved markets number, dollar amount. Investments in underserved areas number. Businesses created, maintained; jobs created. Increased number of EWCP loans... Electronic data interchange and monitoring. Intermediate Outcomes Lower cost loan programs Object Classification (in millions of dollars) Fair and reasonable fees to offset subsidy High currency rates Businesses created, maintained, or expanded Increased sources of capital Increased capital access for underserved areas Increased small business export sales High quality and efficient lending practices Identification code actual 1996 est est Direct obligations: Grants, subsidies, and contributions Reimbursable obligations: Subtotal, reimbursable obligations Total obligations BUSINESS LOAN PROGRAM ACCOUNT (Legislative Proposal, not subject to PAYGO) Summary of Loan Levels, Subsidy Budget Authority and Outlays by Program (in millions of dollars) Identification code actual 1996 est est. Direct loan levels supportable by subsidy budget authority: direct , Total direct loan levels ,650 Guaranteed loan levels supportable by subsidy budget authority: 2150 SBIC Participating Securities SBIC Debentures Total loan guarantee levels Guaranteed loan subsidy (in percent): 2320 SBIC Participating Securities SBIC Debentures Weighted average subsidy rate Subsidy Rate Changes. Over the past year, pursuant to Title V of the 1974 Budget Act, SBA and OMB have conducted a detailed analysis of the loan performance of SBA s 7(a) and 504 credit programs during the period from 1983 through The results of this analysis have led to a revision of the FY 1997 subsidy rates for each of these programs. For the 504 program, the data analysis indicates that previous estimates of recoveries were substantially higher than SBA s actual recoveries and that previous estimates of defaults were lower than the historical default rate. Consequently, the baseline (current services) subsidy rate for the 504 program was increased from zero to 6.85 percent. For the 7(a) program, the data indicate that actual recoveries and defaults, as well as the timing of such events, differ from previous estimates. Therefore, the baseline (current services) subsidy rate for the 7(a) program has been increased from 1.06 percent to 2.68 percent. It should be noted, however, that recent trends appear to demonstrate a gradual improvement in the 7(a) portfolio quality. Loans made over the past several years have shown a lower incidence of defaults. This performance improvement and recent legislative changes have been incorporated into the new 7(a) subsidy rate. If these positive trends continue, the 7(a) subsidy rate will begin to decline next year with subsequent reductions to follow for as long as the portfolio quality improves. The SBA and OMB intend to closely monitor these trends and will revise the 7(a) subsidy rate annually as appropriate. Section 504 Reforms. In order to keep the 504 subsidy rate at zero in FY 1997, the budget proposes to transform the section 504 program s funding mechanism into a direct loan program. Under this proposal, SBA would lend directly to certified development companies, rather than guaranteeing their debentures. This change would eliminate the cost of underwriters and other financial intermediaries. Importantly, these changes would not increase the cost of capital to the Certified Development Companies and would not increase the cost of borrowing to small businesses. This revision would lower the 504 subsidy rate from 6.85 percent to zero. SBIC Reforms. The budget proposes to increase fees for both participating securities and debentures. The establishment of an annual interest pass-through fee of one percent on the outstanding loan balance and an increase in the upfront funding fee from two percent to three percent for both programs would reduce subsidy costs as follows: from percent to 3.65 percent for the debenture program; and from 9.07 percent to 3.38 percent for the participating security program.

7 SMALL BUSINESS ADMINISTRATION Federal Funds Continued 931 BUSINESS DIRECT LOAN FINANCING ACCOUNT Identification code actual 1996 est est Direct loans Interest on Treasury borrowing Total obligations New financing authority (gross) New obligations New financing authority (gross), detail: Authority to borrow (indefinite) Spending authority from offsetting collections: Offsetting collections (cash) Change in receivables from program account Portion applied to debt reduction Spending authority from offsetting collections (total) Total new financing authority (gross) Unpaid obligations, start of year: Obligated balance: Fund balance Receivables from program account Total unpaid obligations, start of year New obligations Total financing disbursements (gross) Unpaid obligations, end of year: Obligated balance: Fund balance Receivables from program account Total unpaid obligations, end of year Total financing disbursements (gross) Against gross financing authority and financing disbursements: Federal sources: Payments from program account Non-Federal sources: Repayments of principal, net Interest received on loans Total, offsetting collections (cash) Change in receivables from program accounts Net financing authority and financing disbursements: Financing authority Financing disbursements Status of Direct Loans (in millions of dollars) Identification code actual 1996 est est. Position with respect to appropriations act limitation on obligations: 1111 Limitation on direct loans Direct loan obligations exempt from limitation Total direct loan obligations Outstanding, start of year Disbursements: Direct loan disbursements Repayments: Repayments and prepayments Write-offs for default: Other adjustments, net Outstanding, end of year As required by the Federal Credit Reform Act of 1990, this non-budgetary account records all cash flows to and from the Government resulting from direct loans obligated in 1992 and beyond (including modifications of direct loans that resulted from obligations in any year). The amounts in this account are a means of financing and are not included in the budget totals. Identification code actual 1995 actual 1996 est est. Investments in US securities: 1106 Federal assets: Receivables, net Net value of assets related to post 1991 direct loans receivable: 1401 Direct loans receivable, gross Allowance for subsidy cost ( ) Net present value of assets related to direct loans Total assets Federal liabilities: Resources payable to Treasury Total liabilities NET POSITION: 3100 Appropriated capital Total net position Total liabilities and net position BUSINESS DIRECT LOAN FINANCING ACCOUNT (Legislative proposal, not subject to PAYGO) Identification code actual 1996 est est Direct loans , Interest on Treasury borrowing Total obligations , New financing authority (gross) , New obligations ,683 New financing authority (gross), detail: Authority to borrow (indefinite) , Spending authority from offsetting collections: Offsetting collections (cash) Total new financing authority (gross) , New obligations , Total financing disbursements (gross) , Unpaid obligations, end of year: Obligated balance: Fund balance , Total financing disbursements (gross) ,490 Against gross financing authority and financing disbursements: Non-Federal sources: Repayments of principal, net Interest received on loans Fees Total, offsetting collections (cash) Net financing authority and financing disbursements: Financing authority , Financing disbursements ,381

8 932 Federal Funds Continued THE BUDGET FOR FISCAL YEAR 1997 Credit accounts Continued BUSINESS DIRECT LOAN FINANCING ACCOUNT Continued Status of Direct Loans (in millions of dollars) Identification code actual 1996 est est. Position with respect to appropriations act limitation on obligations: 1111 Limitation on direct loans Direct loan obligations exempt from limitation , Total direct loan obligations , Outstanding, start of year Disbursements: Direct loan disbursements , Repayments: Repayments and prepayments Outstanding, end of year ,259 BUSINESS GUARANTEED LOAN FINANCING ACCOUNT Identification code actual 1996 est est Default claims Payment of downward reestimate to receipt account Total obligations Unobligated balance available, start of year: Fund balance... 1,087 1,258 1, New financing authority (gross) Total budgetary resources available for obligation 1,626 2,126 2, New obligations Unobligated balance available, end of year: Fund balance... 1,258 1,658 1,913 New financing authority (gross), detail: Spending authority from offsetting collections: Offsetting collections (cash) Change in receivables from program account Spending authority from offsetting collections (total) Total new financing authority (gross) Unpaid obligations, start of year: Receivables from program account New obligations Total financing disbursements (gross) Unpaid obligations, end of year: Receivables from program account Outlays from new permanent authority Total financing disbursements (gross) Against gross financing authority and financing disbursements: Federal sources: Federal sources: Payments from program account Payment from program account Reestimates Interest on uninvested funds Non-Federal sources: Fees Recoveries Total, offsetting collections (cash) Change in receivables from program accounts Financing disbursements Status of Guaranteed Loans (in millions of dollars) Identification code actual 1996 est est. Position with respect to appropriations act limitation on commitments: 2111 Limitation on guaranteed loans made by private lenders Guaranteed loan commitments exempt from limitation 9,709 13,921 11, Total guaranteed loan commitments... 9,709 13,921 11,259 Cumulative balance of guaranteed loans outstanding: 2210 Outstanding, start of year... 13,007 18,618 25, Disbursements of new guaranteed loans... 8,402 10,413 11, Repayments and prepayments... 2,423 3,354 4, Adjustments: Terminations for default that result in loans receivable Outstanding, end of year... 18,618 25,225 31,648 Memorandum: 2299 Guaranteed amount of guaranteed loans outstanding, end of year... 14,709 19,677 24,369 Addendum: Cumulative balance of defaulted guaranteed loans that result in loans receivable: 2310 Outstanding, start of year Disbursements for guaranteed loan claims Repayments of loans receivable Write-offs of loans receivable Outstanding, end of year ,239 As required by the Federal Credit Reform Act of 1990, this non-budgetary account records all cash flows to and from the Government resulting from loan guarantees committed in 1992 and beyond (including modifications of loan guarantees that resulted from commitments in any year). The amounts in this account are a means of financing and are not included in the budget totals. Identification code actual 1995 actual 1996 est est. Federal assets: 1101 Fund balances with Treasury... 1,087 1,258 1,658 1,913 Investments in US securities: 1106 Receivables, net Net value of assets related to post 1991 acquired defaulted guaranteed loans receivable: 1501 Defaulted guaranteed loans receivable, gross , Interest receivable Allowance for subsidy cost ( ) Net present value of assets related to defaulted guaranteed loans Total assets... 1,392 1,532 2,110 2, Non-Federal liabilities: Liabilities for loan guarantees... 1,329 1,451 2,034 2, Total liabilities... 1,329 1,451 2,034 2,703 NET POSITION: 3100 Appropriated capital Total net position Total liabilities and net position... 1,392 1,532 2,110 2,798 Net financing authority and financing disbursements: Financing authority

9 SMALL BUSINESS ADMINISTRATION Federal Funds Continued 933 BUSINESS GUARANTEED LOAN FINANCING ACCOUNT (Legislative proposal, not subject to PAYGO) Identification code actual 1996 est est Total obligations New financing authority (gross) New obligations Unobligated balance available, end of year: Fund balance New financing authority (gross), detail: Spending authority from offsetting collections (gross): Offsetting collections (cash) New obligations Total financing disbursements (gross) Against gross financing authority and financing disbursements: Fees Net financing authority and financing disbursements: Financing authority Financing disbursements Status of Guaranteed Loans (in millions of dollars) Identification code actual 1996 est est. Position with respect to appropriations act limitation on commitments: 2111 Limitation on guaranteed loans made by private lenders Guaranteed loan commitments exempt from limitation Total guaranteed loan commitments Cumulative balance of guaranteed loans outstanding: 2210 Outstanding, start of year Disbursements of new guaranteed loans Repayments and prepayments Adjustments: Terminations for default that result in loans receivable Outstanding, end of year Memorandum: 2299 Guaranteed amount of guaranteed loans outstanding, end of year Addendum: Cumulative balance of defaulted guaranteed loans that result in loans receivable: 2310 Outstanding, start of year Disbursements for guaranteed loan claims Repayments of loans receivable Write-offs of loans receivable Outstanding, end of year BUSINESS LOAN FUND LIQUIDATING ACCOUNT Identification code actual 1996 est est Defaults on guarantee loans regular Defaults on guarantee loans SBIC Other expenses Section 503 prepayments Total capital expenses Operating expenses: Interest expense to Treasury Total obligations Unobligated balance available, start of year: Fund balance: Committed Uncommitted Total unobligated balance, start of year New budget authority (gross) Redemption of debt Total budgetary resources available for obligation 1,055 1,013 1, New obligations Unobligated balance available, end of year: Fund balance: Committed Uncommitted Total unobligated balance, end of year Spending authority from offsetting collections (gross): Offsetting collections (cash) Unpaid obligations, start of year: Obligated balance: Fund balance New obligations Total outlays (gross) Unpaid obligations, end of year: Obligated balance: Fund balance Outlays from new permanent authority Total outlays (gross) Against gross budget authority and outlays: Federal sources Non-Federal sources: Loan repayments: Financing programs Investment programs SBIC obligations Section 503 development obligations Interest income: Financing programs Investment programs Other income Total, offsetting collections (cash) Budget authority Outlays Status of Direct Loans (in millions of dollars) Identification code actual 1996 est est. BUSINESS LOAN FUND, DIRECT LOANS 1210 Outstanding, start of year... 1,987 1,675 1, Disbursements: Purchase of loans assets from the public Repayments: Repayments and prepayments Write-offs for default: Direct loans Outstanding, end of year... 1,675 1,476 1,262 SMALL BUSINESS INVESTMENT COMPANY, DIRECT LOANS 1210 Outstanding, start of year Repayments: 1251 Repayments and prepayments Proceeds from loan asset sales to the public or discounted Outstanding, end of year