You're going to go to your bank, and your bank is going to say, "I've known you for 25 years, and I know you operate your doctor's office here, but you know what? I don't want to refinance it. You've never missed a payment, but I've got too much stuff on my books. I just don't want to put it back on my books. I want to get rid of some of it."

Where are they going to go? We have a program called 504. It's for owner-occupied real estate if you expand and create jobs. Temporarily, let's use 504 to do owner-occupied real estate refinancing. Not the bad stuff, not the speculative portfolios that have been accumulated, but owner-occupied, and you haven't gone into default.

It's probably less risky than funding an expansion. It looks like we can do it for zero subsidy. We'll charge a fee to take on the risk, and we'll need a little administrative oversight.

We think we can do $7 billion to $10 billion at very little or no cost to taxpayers. We have the infrastructure to do that right now. We know the demand is going to be there.

Then we said, OK, what else is a gap? Working capital, right? We have a very, very good product: SBA Express. People like it. It uses the bank's own paperwork.

People are concerned with the level of paperwork at SBA. We've worked very hard to reduce that without increasing our risk—we actually have a simplicity task force working on that problem as we speak.

That said, this is a product with no SBA paperwork, it's the bank's own paperwork. It gives a 50 percent guarantee. Is that enough? You know, 50 percent is not nothing. We share the risk equally with the bank.

That's still a pretty good incentive, from zero to 50 percent risk sharing. The problem is the cap is $350,000. It's not big enough. So temporarily, we've asked Congress to increase that cap to $1 million.

Representative Nydia Velazquez, who chairs the House Small Business Committee, thinks raising the size limit for SBA Express loans is a bad idea because of the high default rate for SBA Express loans.

The data says the default rate is not going to be high. Our data says that we have higher default rates for the smaller products, but the bigger you get, the lower the default rate.

That's particularly true for SBA Express loans. We monitor the risk. We're not going to do something that has a very high default rate. And don't forget this is a 50-50 risk sharing with the banks. They may be using their own paperwork, but they take half the risk.

The president's budget noted that default rates on regular 7(a) loans have soared over the past year or so. How are you dealing with these higher default rates?

Our default rates have about doubled. That is about the same as conventional lending.

We've asked for the flexibility to charge fees that would take on more of the costs after 2011. The reason for that is we are in a situation with our budget where we are trying to reduce the deficit, and we are all trying to move forward in a way that we can be more fiscally responsible in terms of deficit reduction.

We're going to look at the situation after 2011 and see how the credit markets are and determine what the appropriate fee structure is to make sure we deliver access to credit.

Do you think the on-again, off-again aspect of the higher guarantee and fee reductions hurts the SBA loan program?

It's always better to have a continuous program that's predictable and where bankers and borrowers can be confident that they can get access to these programs that they want to use.

We've had very good response to the queue, because I think we've used technology and transparency really well.

Nobody likes, I think, to be in the queue in that they'd rather fund the loan. There's a choice—they could fund the loan with a 75 percent guarantee. We were there to do business, but if they wanted to wait and do an assessment, they could see where they were in the queue, like a standby line, at every point in time.

And I think people appreciated that transparency, which allowed them to decide, "Do I want to be in the queue or do I want to just go forward."

We were able to bring down the queue and fund everybody in literally days after the funding took place.