Senate Reviews SBA Lending

April 10, 2019

On April 3, the Senate Committee on Small Business and Entrepreneurship held a hearing titled, “Reauthorization of the SBA’s Access to Capital Programs.” The hearing was the first in a series of scheduled hearings to review the Small Business Administration’s (SBA’s) capital, counseling, and contracting programs to inform the committee as it drafts legislation to make needed updates and improvements.

One of NSBA’s Priority Issues for the 116th Congress is for lawmakers and regulators to improve and enhance the availability of credit, capital and equity financing to small businesses, and strengthen SBA’s lending programs. Capital is the lifeblood of any small business, and according to NSBA’s 2018 Mid-Year Economic Report, there was a drop in bank lending to smaller firms, which has real-world implications: 35 percent said lack of capital is hindering their ability to grow their business or expand operations, and 19 percent said they had to reduce the number of employees as a result of tight credit. In the same report, 71 percent of small firms reported they are able to get adequate financing, yet that is down from 73 percent only six months prior.

According to Chairman Marco Rubio (R-Fl.) the purpose of the initial hearing was to begin the process for the reauthorization of the Small Business Act, and programs in the Small Business Investment Act. Chairman Rubio stated that “since we have not undertaken a full reauthorization of the Small Business Act in many years, it is integral that we assess the programs, look at the history and impetus for the creation of each program, discuss the current state of the programs, and pull suggestions and ideas from members and witnesses that will make the programs better serve small businesses.”

Historically, the Senate committee, along with the House Small Business Committee, undertook the process of reauthorizing the Small Business Act periodically. Most recently, the process was undertaken every three years. That process fell by the wayside, and the last time a reauthorization was completed in its entirety was in 2000. When that authorization expired in 2003, Congress began a long series of extensions of the Small Business Act. In 2011, Congress stopped reauthorizing the Small Business Act altogether, instead deferring to the Appropriations Committee to set authorization levels.  

In Chairman Rubio’s opening remarks, he said that he believes that “it is the responsibility of this Committee, and Congress, to review programs under the Small Business Act on a regular basis. This is to ensure that they are serving small businesses as intended, and that taxpayer dollars are targeted to the most efficient and effective programs.”  
The focus of the hearing was on the SBA’s four major capital access programs: the 7(a) Loan Guaranty Program, the 504 Loan Guaranty Program, the 7(a) Community Advantage Pilot Program, and the SBA Microloan Program.

NSBA continues to urge Congress to protect and support the SBA’s critical loan programs as well as increase credit unions’ small-business lending cap so that. With the continued high loan volumes, NSBA supports an increased authorization level for SBA loans in order to prevent unnecessary stalls in lending. Further, NSBA believes regulators should seek avenues to ease restrictions on lenders for smaller loans since a one-size-fits-all formula doesn’t often work for many small businesses and start-ups.

Click here to watch video of the entire hearing.