SBA Cuts Endanger Small Business Lending

President Barack Obama released his proposed budget for the 2012 fiscal year (beginning October 2011) this week, bringing about new concerns for American small business owners who are fearful of the dramatic decreases in Small Business Administration (SBA) funding and subsidies. According to CNN Money, “President Obama's 2012 budget proposals calls for SBA funding of $985 million, down slightly from the $993 million proposed for fiscal year 2011. The 2012 proposal is an increase from the $824 million core budget the SBA had in 2010, but a sharp 45% drop from the $1.8 billion the SBA actually got in 2010, thanks to its supplemental allocations.”

Simply put, the President’s proposal would cut just $8 million from the SBA budget next year. However, the SBA enjoyed government subsidies amounting to $963 million in 2010, money it will not see in 2012 under Obama’s current proposal. This news is concerning to entrepreneurs, many of whom depend on small business loans backed by the SBA as their primary form of small business financing.

Without the subsidies that have bolstered the SBA during the recession, the agency is likely to make dramatic cuts, which will impact small business owners. Without assistance from the SBA, such as SBA-backed small business loans, those entrepreneurs are less likely to obtain the small business financing they need, further endangering their operations.

With this level of uncertainty surrounding the 2012 budget and its impact on the SBA, particularly considering that Congress has yet to approve the President’s budget for 2011, despite the fiscal year having started back in October 2010, those seeking small business loans are increasingly more likely to find a better result by looking into other forms of small business financing. One such method of small business financing is accounts receivable factoring.

Accounts receivable factoring services, particularly those through firms with private funding sources as opposed to those reliant on today’s potentially unstable banks, represent an ideal alternative to traditional small business loans. Factoring involves less risk and is more accessible to today’s struggling small businesses. In the past, accounts receivable factoring was considered a last resort for those unable to obtain traditional financing. In today’s market, however, factoring works for small businesses because it is fast, accessible, and enables small business owners to have reliable, quick access to the working capital they need without creating debt the way a small business loan does.