NEW YORK—The automatic cuts, or sequester, that was triggered Friday, will result in a $5.5 million blow to the Small Business Administration (SBA) nationwide.
The SBA, a key small business resource, directly supports 20 percent of the job creation in the country, according to a new report from Rep. Nydia Velazquez (D-N.Y.), released on Monday.
Small businesses make up two-thirds of the tax base in New York City and they employ 50 percent of the workers, according to Councilwoman Diana Reyna, chair of the Committee on Small Businesses.
“The sequester will be devastating to our economy,” Velazquez said outside City Hall in Manhattan.
An estimated 700,000 jobs will be lost nationwide from the sequester, according to the report (pdf).
“These are not numbers,” Velazquez said. “This is about people.”
Nationwide, 78 SBA centers will have to close, which translates to a loss of 11,310 jobs annually. One or more of the eight centers in New York City could be closed, and if not, they will face cuts in services—having a flow-on effect that means less entrepreneurs get help.
The SBA will run out of money in August, while the fiscal year ends in September, said Steven Kravitz, chairman of The Loan Source, a non-bank lender based in Manhattan. He predicts the SBA will cut the average loan by 20 percent while raising fees and interest rates.
“It’s a horrible thing,” he said. “This is a direct cut into the bloodline of the government.”
“People are going to come to me and I’m going to have to say ‘you know what, you’re going to have to pay more in fees,’ and they’re going to say ‘I can’t afford it.’”
Tariq Koarti, an entrepreneur who obtained a loan from the SBA through the The Loan Source, said the sequester will impact him.
Koarti immigrated to the United States in 1984 from Sudan and started a business years later. His latest business, a grocery store in an economically depressed area of Albany, required $800,000 in borrowing.
“The SBA made my dream come true,” said Koarti. He was planning on borrowing more in the future, either for the grocery store or another venture, but fears the potential changes to how the lending works.
Other Sectors in New York Impacted by the Cuts:
- 590 teacher jobs at risk ($42.7 million in funding cuts)
- 4,520 fewer low-income students receive aid
- More than $8 million less public health funds, weakening, among other areas, ability to respond to natural disasters
- $1.4 million less funds for providing meals to seniors
- 12,000 civilian Department of Defense employees furloughed ($60.9 million)
- The Second Avenue Subway and East Side Access—two of the largest transit projects in the country—could be delayed by across the board cuts of nearly six percent.