Over the last five decades, the U.S. Small Business Administration has been there to propel the likes of Federal Express, Intel, Staples and thousands of lesser-known small businesses.

But advocates say recent policy changes and severe budget and staffing cuts in the last six years have left the agency hard-pressed to fulfill its mission to provide programs and services to the nation’s 25 million small companies, which the agency defines as businesses with 500 or fewer workers.

Since 2001, the agency’s financing has been sliced nearly in half, to $464 million in the proposed 2008 budget. Staff cuts have been almost as deep, with the agency losing 31 percent of its work force.

The impact has been felt at the Providence district office, where the staff has been reduced to 6 today, from 15 in 1998.

Still, Mark Hayward, district director of the Providence office, said the SBA can get the job done. He said some of the work has been centralized and the office just doesn’t have the need for the loan processors it once had.

Nationally, the federal cutbacks have had an impact on the SBA’s primary loan program for small businesses, known as 7(a).

Since the 2005 fiscal year, the agency has cut financing for the program and restored an earlier, more-costly fee structure. Now a borrower pays a minimum of $2,000 in up-front fees for the smaller loans of up to $150,000, an increase from $1,000 before. For larger loans of up to $700,000, the fee now is 3 percent, up from 2.5 percent before. For loans above $700,000, the fee remains unchanged at 3.5 percent.

Even with the higher fees, the agency says, the loans have easier credit terms and longer repayment periods than those typically available at commercial banks. But many small-business advocates say that is a moot point, as many small businesses cannot even pull together the amounts to cover the fees.

The loan volume generated from the Providence office has slipped during the last few years. So far, for the current fiscal year that started Oct. 1, the 351 loans guaranteed through May 31 is down from the same period last year.

Hayward said the Providence office still gets good participation from local and regional banks that participate in the 7(a) loan program.

But he said one change that caused a sharp decline in the lending program was the repeal in 2005 of a tax credit that allowed small-business borrowers to recoup the guarantee fee, of 2 percent or more of the loan amount, that the SBA required companies to pay.

A summit of small-business advocates who met in January listed the return of the tax credit as one of its priorities. Governor Carcieri has included the reinstatement in his proposed budget, which is being considered by the General Assembly. The cost of the credit is about $500,000.

At the national level, the SBA has also proposed raising the fees for its microloan program, which can be used for construction and expansion of facilities. Together, these loans totaled $20 billion in 2006, according to the SBA.

While fees for the loans have increased, the average size of the loans under the 7(a) and microloan programs has decreased 25 percent, to $188,878 in fiscal year 2006, from $252,314 in fiscal year 2001, according to data from the SBA. The total number of loans has more than doubled, however.

The SBA said that part of the reason that the average amount of the loans has dropped is because a number of banks use a process called SBA Express. For it, banks use their own documents and need less interaction with the agency. The SBA guarantees only 50 percent of these loans instead of the 75 percent to 85 percent on larger loans.

The increased fees for the loans may have had another effect. The number of banks participating has dropped by nearly half, to 2,751 in fiscal 2006, from 5,228 in fiscal 2001, according to the National Small Business Association, in Washington, D.C. The association said some of the drop may reflect bank consolidation, but fees and other changes in the 7(a) program had the biggest impact.

Because of the higher fees, many entrepreneurs have turned to a growing credit card market aimed at small-business owners. A survey by the association found that the overwhelming majority of small businesses use credit cards for their financing instead of SBA or other bank loans — meaning that the interest rate paid can be as much as 10 percentage points more than a conventional loan.

“The SBA in many ways is hurting small business by increasing these fees,” said Marilyn Landis, owner of Basic Business Concepts, a small company in Pittsburgh, who relies on credit cards for most of her financing. “The decrease in the size of the loans is certainly a detriment to small companies — it’s barely enough to get a company started and certainly not enough to grow one.” Landis is vice chairwoman of the National Small Business Association.

Even more than the higher fees, reduced staffing levels at the agency have had a profound effect on small business, advocates say.

Smaller staffs have contributed to a loss of institutional knowledge at the SBA and many people are in jobs for which they lack the necessary training, said Morris A. Little, president of B&W Solutions, a human resource management firm in Oxon Hill, Md. Little is chairman of the board of the National Black Chamber of Commerce.

“You have people that can’t even explain SBA programs to you,” Little said. “It’s frustrating, and after a while you don’t even bother asking.”

The biggest area where the staff cutbacks are hurting small business is in helping gain access to $400 billion in federal contracting, Little and others said.

According to a study by congressional Democrats last year, small businesses lost more than $12 billion in contracts because of miscoding: the contracts went instead to giant corporations such as Wal-Mart and Google, among others.

Staffing was cited as a main factor because the agency does not have enough people to ensure that federal agencies meet their legally mandated goal of providing 23 percent of their contracts to small businesses.

Overall, the number of full-time SBA employees has dropped 29 percent since 2001, to 2,047 from 2,863, according to the agency. The SBA has 54 people who oversee federal contracting, fewer than it had in 1993 when federal contracting was half its current size. As a result, small businesses got just 19 percent of federal contracts in 2006, according to Eagle Eye, a research firm in Fairfax, Va. And that 19 percent includes large corporations coded as small businesses, the firm said, so the actual number could be smaller.

Steven C. Preston, who became the SBA administrator last June, acknowledges that budget and staffing cuts have hurt, but he still sees the agency’s loan programs and services as vital to small business.

To address budget shortfalls and staffing cuts, Preston asked Congress for $464 million for the 2008 fiscal year. The budget request is 5 percent higher than the approved budget for fiscal 2006. For the 2007 fiscal year, the agency operated without an approved budget, under a continuing resolution that provided the same financing as the year before.