Washington, D.C.— Today, the House Small Business Committee Subcommittee on Economic Growth, Tax, and Capital Access under Chairwoman Sharice Davids (D-KS) held a hearing examining the role of community lenders in Small Business Administration (SBA) programs and steps Congress can take to increase capital access in underserved markets.
“The ability of community lenders to reach underserved businesses should serve as an important lesson moving forward. Though the PPP portal closed last May, these community lenders can be a vital tool as we work to drive an equitable recovery,” said Chairwoman Davids. “By strengthening existing SBA programs that utilize community lenders, we can help ensure that all small firms have access to the capital they need to grow and thrive.”
In later phases of the Paycheck Protection Program (PPP), Congress instituted reforms to help community lenders participate in the program on equal footing with bigger banks. These changes proved to be effective in increasing access to PPP for underserved businesses. As a result, in later rounds of PPP, more funding reached underserved markets and the average loan size decreased substantially, showing that more money went to the smaller businesses in need. Small firms also reported the highest-level of satisfaction with community-based lenders and small banks.
In addition to pandemic relief programs, community lenders participate in several existing SBA programs. Programs like the 504/CDC Loan Program, SBA Microloan Program, and Community Advantage Pilot Loan Program are all delivered by community lenders. During the hearing, community lenders testified on their experience in SBA programs and the steps Congress can take to provide more capital to underserved markets.
“We are proud of our milestones and contributions to help entrepreneurs and strengthen Illinois communities. Our story is one shared by many other CDCs that are also engaged in impactful economic development initiatives to help their respective local small business ecosystems,” said Manny Flores, President and Chief Executive Officer of SomerCor in Chicago, IL. “The national CDC network plays an integral role in helping bring more economic development resources to communities across the nation and has a positive track record, especially through the deployment of the SBA 504 program.”
“A hallmark of the Microloan program is the ongoing technical assistance needed to help underserved entrepreneurs succeed at every step of their business’s development,” said Kerry Doi, President and Chief Executive Officer of the Pacific Asian Consortium in Employment (PACE) in Los Angeles, CA. “The Microloan program serves small businesses that encounter difficulty in gaining access to from conventional lenders. By serving entrepreneurs that operate start-up and new businesses, lack sufficient collateral, or have limited or poor credit histories, the SBA Microloan program fills a gap in the private market.”