Luetkemeyer: SBA Lacks Infrastructure and Expertise to Expand Number of Small Business Lending Companies
WASHINGTON, D.C. – Today, Ranking Member Blaine Luetkemeyer (R-MO) issued the following statement on the Small Business Administration’s decision to lift the moratorium on Small Business Lending Companies (SBLCs).
“The SBA has proven time and again to be ineffective and mismanaged. They lack both the infrastructure and expertise to be the only regulator overseeing lenders. Lifting the Small Business Lending Company (SBLC) moratorium, which has been in place since the early 1980s without acknowledging their oversight and regulatory deficiencies is a major issue. Now more than ever, the SBA should be working to ensure the safety and soundness of these public-private lending programs especially in light of the economic shocks of the last few years and the economic headwinds of today, including the forty-year high levels of inflation that Main Street businesses and Americans continue to face. The SBA’s inability to answer and respond to the simplest of inquiries proves they are incapable of overseeing new unregulated lenders. From a federal financial regulator perspective, the SBA shouldn’t be going it alone,” said Ranking Member Luetkemeyer.
Read the full decision here.
There are currently 14 SBLCs due to the moratorium that was instituted in 1982 due to a lack of resources at the SBA. As recently as this past spring, Associate Administrator for the SBA’s Office of Capital Access, Patrick Kelley, reported to the Committee in Questions For the Record (QFRs) that the “moratorium was enacted in the early 1980s due to the oversight responsibility SBA bears for non-regulated institutions such as SBLCs.”
As of Monday, November 7, 2022, the SBA is proposing to lift the moratorium on licensing new SBLCs. Additionally, they are proposing to add a new type of entity called a Mission-Based SBLC as well as proposing to remove the requirement for a Loan Authorization within the 7(a) and 504 Loan programs and rely solely on a lender’s documents.
In the proposed rule, the SBA states that “removing the moratorium on licensing new SBLCs and Mission-Based SBLCs opens opportunities for more nontraditional lenders to participate in the 7(a) Loan Program, providing additional sources of capital to America’s small businesses and targeting gaps in the credit market.” The Committee remains very concerned about changes that haphazardly overextend the SBA’s responsibilities at a time when they are devastated by fraud and underperforming on their core mission of serving the nation’s 33 million small businesses.
Public comments are due in 60 days.