Short of staff and long on programs, the Small Business Administration is thinking of ceding one of its privileged powers - the power to approve a loan - to the nation's banks.

The agency wants to give commercial banks nearly full responsibility for approving most of the agency's loans to small business, while the loans will continue to carry a 90 percent government guarantee.

The idea has yet to be publicized widely among either the country's small business community or the banking community. But the authority to make the transfer as been slipped into SBA authorization committee. SBA Administrator E. Vernon Weaver disclosed the move in a discussion with reporters yesterday.

At stake is about $2.5 billion in bank loans to small businesses that the SBA currently guarantees. In the past, SBA agents have worked closely with the banks in approving, servicing and, when necessary, liquidating each of the loans made.

Under the proposal, the banks alone would do the deciding, but the SBA would continue to guarantee the loan for most of its value in the event of default.

The purpose, Weaver said, is to free SBA staffers for other tasks. He also said he expects the new plan to attract more banks to the government's program, opening up lending markets that could total as much as $10 billion in fresh capital for small businesses.

Weaver said the SBA guarantees for the loans could be pooled by banks and resold to insurance companies and pension funds, giving small businesses indirect access to sources of funding commonly tapped by large corporations.

But Weaver conceded there could be problems with the new arrangement. "We went through a lot of soul searching before pushing it," he said. "Many have been skeptical. Some, for instance, think the banks will go only for the good loans and unload the bad ones on us."

The SBA is running a pilot program for the proposal, the results of which will be in by the fall. Weaver gave assurances that the agency would be able to hold the number of bad loans to roughly the same percentage it now experiences - 8 to 10 percent of the total.

Those banks already briefed on the plan voiced qualified support. "We'd like to cooperate," said Cecil Byrd, a senior credit officer with the Bank of America in Los Angeles. "But we have some reservations until we see how they will handle some sticky points."

One key motivation for the switch, Weaver said, has been pressure on the SBA to support small business in times of more stringent government budget constraints. In the past 10 years, the SBA's loan portfolio has grown from $1.5 billion to $12.5 billion while its staff has shrunk.

"We have to get out of the retail and into the wholesale business," Weaver remarked. "That means relying on the private sector to take care of the day-to-day managing and lending."

In answer to questions on reports of abuse and fraud by agency employes, Weaver, a former Arkansas insurance executive appointed by Carter two years ago, said some guilty employes have been fired. He added that new management procedures have been adopted at the agency and that a computer control system has been installed. CAPTION: Picture, Sen Edward Kennedy addressing independent business convention yesterday. By Frank Johnston - The Washington Post