The U.S. Small Business Administration, the federal agency created to support America’s small businesses, is currently in a showdown with the U.S. Congress’ House Small Business Committee, reports Kent Hoover, the Wichita Business Journal’s Washington Correspondent.

The details: The House Committee is currently working to pass The Small Business Investment Expansion Act of 2007, legislation designed to promote investment during small businesses’ crucial early stages. The SBA is opposing the legislation on several points.

First of all, the bill in question would “expand the New Markets Venture Capital program, which targets businesses in low-income areas.” The SBA is against this expansion, on the grounds that the young program has yet to repay its loans, or even indicate that it is able to do so.

In addition, the bill would create a new SBA “angel investor” program requiring it to provide matching funds for early-stage business investments. The SBA has expressed skepticism on this point, as well, stating that money would be better spent keeping “taxes on investment profits low”. (What’s an “angel investor”? Click here to see Wikipedia’s description.)

Mr. Hoover adds:

The proposed bill also would restore the ability of small companies that have received large amounts of venture capital to qualify as small businesses for government programs. Under current SBA rules, a venture capital firm is considered the owner of a firm if it has a controlling interest in the firm. The SBA then counts all of the employees of all the companies the venture capital firm controls when determining whether the VC firm is a small business.

As a result, many small biotechnology companies — which often require a lot of VC investment — no longer qualify as small businesses. That’s not fair, said Dr. Scott Koenig, president and CEO of Rockville, Md.-based MacroGenics, because the companies themselves operate the businesses.

The question is, can these two important organizations reach a compromise to get the bill passed? And if so, would it be for the best? On the one hand, more loan money available to America’s small businesses seems like a surefire benefit; however, if the SBA is crippled as a result, then the long-term drawbacks definitely outweigh the short-term advantages. Frustratingly, whether or not that would really happen is impossible to predict.

Decide for yourself: Read the original story here or here, and let us know what you think in the comments section.