Small Business Committee Examines SBA’s 7(a) Loan Program
Popular Program Helps Entrepreneurs Access Early Capital
WASHINGTON – Today the House Small Business Committee’s Subcommittee on Investigations, Oversight and Regulations examined the successes of the U.S. Small Business Administration’s (SBA) 7(a) loan program, as well as potential opportunities to strengthen and improve the program. The 7(a) loan program is the SBA’s most common loan program, which made 64,000 loans in FY2015, totaling $24.1 billion. Today’s hearing was the first in a series of hearings and actions the Small Business Committee will be taking this year to reform and protect the popular program which helps entrepreneurs access crucial early capital.
“Our start-ups, our entrepreneurs, our small businesses—the true engines of our economy—continue to experience a rigid lending environment, said Subcommittee Chairman Trent Kelly (R-MS). “While large companies are turning to debt and equity markets to raise capital, small businesses all over the country regularly turn to conventional bank lending to finance their projects.”
“At times, small firms cannot access conventional lending, so they have nowhere to turn for the capital to grow their business and create jobs. The program, which is currently running at zero cost to the American taxpayer, does not provide direct loans; rather, the SBA offers guarantees of repayments made by lenders,” explained Subcommittee Chairman Kelly, who was chairing his first hearing as the new Chairman of the Subcommittee on Investigations, Oversight, and Regulations.
Small Community Banks and Credit Unions Weigh In
“Small businesses are the driving force of our economy and the key to its success,” testified Sonya McDonald, the Executive Vice President and Chief Lending Officer of the Randolph Brooks Federal Credit Union, who testified on behalf of the National Association of Federally-Insured Credit Unions. “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 7(a) program provides much needed opportunities to established and fledgling businesses, there are several relatively simple steps that could propel the program to its full potential.”
“A robust and sustainable 7(a) program with broad community bank participation will help small businesses thrive and create jobs, strengthening and extending a sluggish economic recovery,” said Cindy Blankenship, the Vice Chairman of Bank of the West in Grapevine, Texas, who testified on behalf of the Independent Community Bankers of America.
“The American entrepreneurial spirit is stronger than ever,” observed Tony Wilkinson, President and CEO of the National Association of Government Guaranteed Lenders. “Unfortunately, there is a very real gap in conventional bank lending in this country and even the most qualified business owners often struggle to secure financing that meets their business needs.”
“A small business seeking capital is often offered loans with terms of 90-days to 3 years when they really need much longer term financing to thrive. The needs of this country’s small businesses have always been a depository mismatch for banks that simply cannot, or may be reluctant to, tie up their capital in long-term loans for borrowers, especially in wake of the Recession,” added Wilkinson.