Since the beginning of the 1990s, thousands of aspiring entrepreneurs have moved away from unemployment or welfare by borrowing a few thousand dollars - even as little as $500 - to set up their own small business.
Several years ago, Diane Barrett Holloway, a single mother and out-of-work pastry chef, used a $5,000 loan from a local women's economic agency in Silver City, N.M., to start a restaurant in an old storefront, cooking for customers with a scavenged pizza oven and serving them on a half-dozen mismatched tables.
"That money made the difference," said Holloway, whose restaurant, Diane's, is now thriving, with 30 employees. She plans to open two more restaurants next year. "Without it, I wouldn't have had a chance to get my business going."
Now the modest financial backing that Holloway and other women and minorities have used to create jobs for themselves and others may soon be shut off.
The Bush administration has proposed ending the financing for the Small Business Administration's micro-loan program, which provides seed money and technical assistance to startups and low-income entrepreneurs.
Small-business owners like Holloway were wooed in the recent election by both parties, which hailed them as driving the U.S. economy by creating millions of jobs across the country.
But now that budget time is here, a political debate is boiling over administration proposals to scale back small-business programs.
The micro-loan program, which lent almost $33 million to 2,400 entrepreneurs in fiscal 2004, is one of 10 agency programs set for termination under the president's proposed 2006 budget.
The program's overall financing is minuscule compared with the Small Business Administration's giant 7(a) guaranteed loan program, which backed $12.7 billion in loans in fiscal 2004 to nearly 75,000 businesses.
But its advocates argue that a micro-loan is almost always the essential first step to success for women and minorities, who usually do not have the money, credit history or collateral to borrow from a commercial bank.
Defenders of the administration's proposed cutbacks, including the agency's administrator, Hector V. Barreto, say that, in reality, the flow of funds to small businesses will be little affected. They say the government will save money by not having to pay for the technical assistance that the law requires for entrepreneurs receiving micro-loans.
