House Small Business Subcommittee on Investigations, Oversight, and Regulations, under the Chairmanship of Rep. Mike Coffman (R-CO), today held a hearing with financial institutions about small business access to capital and the lenders' experience with the SBA’s financial assistance programs. This hearing served as a continuation of a June 6, 2012 hearing with SBA Administrator Karen Mills about the agency’s management of its capital access programs.
“This hearing provided an opportunity to evaluate the current state of small business lending and how the SBA can improve its processes to make its programs operate more efficiently,” said Chairman Coffman (R-CO). “With small business lending at an all time low, Washington must embrace policies that support functional capital markets without imposing undue restrictions on providers of debt and equity capital. And, in order for SBA programs to operate at the highest efficiency, SBA should be more transparent with its lending partners about the management of its programs, become more streamlined, and develop a consistent decision-making process. Access to capital continues to be a significant challenge to many small businesses, and the SBA needs to help as many firms as possible through efficient programs and sound, predictable policies. Helping meet the credit needs of small businesses will lead to more growth and job creation to move our economy forward.”
For related hearing documents, click here.
Notable Witness Quotes:
David J. Rader, Business Executive for SBA Lending at Wells Fargo in Minneapolis, MN said, “Wells Fargo greatly appreciates the very constructive engagement of SBA and the interest in lenders perspectives in meeting small business owners financing needs. We regularly participate with the SBA in an ongoing dialogue on credit policy issues, oversight processes and program enhancements. We also believe there are opportunities to improve the programs and streamline the very complex and rigid Standard Operating Procedures (SOP) to the benefit of our customers.
“Wells Fargo continues to urge SBA to focus its resources on streamlining and improving existing 7(a) and 504 loan programs rather than creating new spinoff programs that serve a limited niche and are confusing to customers. The recently revised CAPLine program is a great example of SBA listening to borrowers and the lending community. The Agency made substantive changes to a dormant program, enhancing it and making it into a viable, workable lending tool, able to meet the working capital needs of small businesses.”
Brett Martinez, President and CEO of Redwood Credit Union in Santa Rosa, California said, “Streamlining is an area that directly affects credit unions and their members. As members of the Small Business Committee know, SBA lending is very specialized and requires an enhanced level of training in order for lenders to originate and service loans effectively. As a result, higher volume and larger SBA lenders likely find that the process is working for their institutions and borrowers. Indeed, existing policy and procedures seem to be working for both Redwood Credit Union and our members. However, this may not be the case for all credit union SBA lenders. The application process requires more information than is required for a conventional loan. Overall, there is a greater amount of paperwork as compared to a conventional loan.”
Tim D. Dixon, Senior Vice President and Head of SBA Lending at Citizens Bank in Warrensville Heights, OH said, “Many business owners who are doing well in this environment are also cautious to take on additional debt or to hire new employees without the certainty our economy is recovering enough to keep demand for their products at a level to sustain additional growth. And the continued reports of a possible double-dip recession and talk of a pending “economic cliff” will only further the concerns of business owners and the confidence of the American consumer.
“While having the ability to make slight tweaks can be beneficial at times, quick and frequent changes to the SBA lending process through the SOP process can create real-world challenges. As the terms of the SOP are ever-changing, it creates practical challenges to interpret revisions, train staff, update systems and be in compliance if these changes are coming too frequently. The ability of an institution to keep up with changes to the SOP can have large compliance costs implications, which can adversely affect lending.”
Robert L. Marquette, President and CEO of Members 1st FCU in Mechanicsburg, PA said, “If Congress and the SBA were to make it easier for credit unions to participate in these programs, small businesses throughout the nation will have greater access to capital at a time when it is needed most.
“Small businesses are the driving force of our economy and the key to its success. The ability for them to borrow and have improved access to capital is vital for the job creation that will lift our nation out of the economic malaise in which we find ourselves today. And while the Small Business Administration’s financial programs are providing much needed opportunities to established and fledgling businesses, there are still obstacles withholding the programs from their full potential. We are confident this subcommittee will do what is necessary to ensure that these programs are successful, while ensuring eligibility requirements and other qualifying criteria aren’t overly burdensome on the financial institutions that participate in them.”