The U.S. Small Business Administration will continue battling Congress as it works to add funding the Bush administration opposes to two loan-guarantee programs for the year starting Oct. 1, the agency's regional administrator said during a visit to the Business Journal's offices.

The Senate this fall is expected to consider following the House of Representatives, which in June added funds to SBA's 7(a) and micro-loan programs for guarantees of $500 to $35,000. The House earmarked $40 million for 7(a) funding, and added $11 million for micro-loan funding – $10 million for technical help to business owners and $1 million for the loans.

William M. Manger Jr., SBA's administrator for the region that includes New York State, said the money would serve to cap the volume of 7(a) guarantees SBA can make, thus depriving some business people of the program's benefits.

"We would have to shut the program down. We would only be able to do the loans through January of 2007. That's crazy," said Manger, SBA's Region II administrator. "If we go back to a system where there's a partial subsidy to run the loan programs, that means there's a final cap on the number of loans that can be made."

Congress wants to fund the subsidy by cutting the budgets of SBA and three other agencies by $10 million each. That would force the layoff of 70 to 80 employees, Manger said. "I don't see how that's a win-win anywhere. We are hopeful the Senate will not take that up."

Earlier in July, the Senate Appropriations Committee held to the Bush SBA budget when it reported out a bill for the portion of the budget that includes the agency.

Sen. John Kerry (D-Mass.) had yet to decide on offering an amendment on the Senate floor to add subsidies for 7(a) and micro-loans, but will fight to contain loan fees, spokeswoman Kathryn Seck said. Kerry's the ranking Democrat on the Senate Committee on Small Business & Entrepreneurship.

Proponents of the higher loan, such as Rep. Nydia Velazquez (D-Brooklyn), have argued the extra money would benefit smaller businesses by lowering their fees. The proponents say that would help reverse a dip in the volume of SBA 7(a) loans.

Businesses can borrow up to $2 million under 7(a), with the agency guaranteeing up to $1.5 million.

From Oct. 1 through July 22, about $11.4 billion in 7(a) loan guarantees had been approved by the agency, down from $11.9 billion a year ago.

It's not the first time SBA has been in the ironic position of resisting more money from Congress for its operations. This budget squabble is different because Democrats are making the SBA more of an issue in this congressional election year. Hoping to derail the issue, President Bush this year has proposed his first budget increase for SBA – to $639 million next fiscal year, up $46 million over last year, but still about one-third less than its $900 million size when he took office.

The House has added $33.8 million to that budget, bringing it to $672.8 million, including $199 million for disaster loans. So far, the Senate has gone along with Bush.

"During the conference negotiations on SBA's appropriations, the difference between the House and Senate budget levels will be reconciled," said Kate Davis, a spokeswoman for Velazquez.

One professional who works with Westchester small-business owners praises the loan-guarantee programs.

"The programs are important and are worthy of funding." said Thomas Morley, director for the state Small Business Development Center region that takes in Westchester, Rockland and Putnam counties. "A lot of companies don't need it, but there are a lot of companies that do, and those companies can become very significant players."

Morley noted that SBA guarantees played important roles in the development of FedEx Corp., Staples Inc. and some of today's other corporate giants.

SBA said it agrees, but wants the programs to pay their own way through fees rather than rely on federal subsidies.

"The loans are now on a zero-subsidy from the taxpayer. That's a good thing," Manger said. "We're doing twice as many loans as the last year of the Clinton administration on less money from the taxpayer. Any way you look at it, that's a success story."

A Clinton-era SBA official says that success could be even greater if SBA received more funding from Washington. "It's not a cheap program, but it's a long-term investment. Regrettably, I'm not sure there's a cheaper way to do it," said Fred P. Hochberg, the SBA's deputy administrator and acting administrator from 1998-2001.

"It seems out of step that America's smallest entrepreneurs with the least amount of capital should have to go it alone more than any other segment of our economy," said Hochberg, now dean of Milano-The New School for Management and Urban Policy.

Lloyd Chapman, a persistent SBA critic and president of the American Small Business League in Petaluma, Calif., said the agency's fight with Congress reflected his view that the Bush administration is trying to starve SBA out of existence and shift its programs to the U.S. Commerce Department – a view SBA has emphatically denied.

The budget battle takes shape as SBA welcomes a new administrator. Steven C. Preston, executive vice president of strategic sources at The Service Master Co., whose holdings include pest control chain Terminix, was sworn in July 10 following a smooth confirmation by the Senate.

Manger said Preston has already identified one key priority: a better response to disasters than the slow going found by business owners damaged by Hurricane Katrina. To that end, Manger and all nine other regional administrators will attend a conference in New Orleans on the first anniversary of the disaster.

Other priorities of Preston will emerge in coming months, Manger said.