Mr. President, I want to make a statement about a small business bill that the Senate passed last week. I am referring to H.R. 4062, which, among other things, provides a temporary solution to the…
Mr. President, I want to make a statement about a small business bill that the Senate passed last week. I am referring to H.R. 4062, which, among other things, provides a temporary solution to the administration's self-created funding crisis for the SBA's largest small-business lending program, commonly referred to as the 7(a) Loan program. In many ways, the bill is similar to legislation I introduced four weeks ago, S. 2186. For example, it adopts my provision to keep the 504 program operating through the rest of this fiscal year instead of subjecting the 504 borrowers and lenders to
another series of disruptive temporary extensions. Similar to my bill, it also lifts the $750,000 cap on loans, lifts the restriction on combination or piggyback loans, gets loans to those small businesses denied 7(a) loans since the program shutdown in January, and extends the operation of the SBA overall, including the Small Disadvantaged Business Program and the Surety Bond program.
In general, H.R. 4062 is a step in the right direction and I commend Congressman Manzullo and Congresswoman Velazquez for their work. I do, however, have some concerns about the bill, concerns shared by many in the small business community, and I regret that the Senate Republicans blocked a bi-partisan Snowe-Kerry amendment to address those concerns.
For example, H.R. 4062 did not address the pressing need to correct the outdated funding formula for the SBA's Women's Business Centers program. The law needed to be changed before the Agency awards this year's grants because more than 50 Centers around the country are at risk of losing their matching federal money. I had been advocating for this change since I introduced S. 2186 on March 9, and the Snowe-Kerry amendment included my provision. Unfortunately, one or two Senate Republicans objected to the provision and blocked its passage.
As for the 7(a) Loan Program, I am concerned about the extent of the fee increases, the lack of data justifying the increases, the rapid expansion of the SBAExpress pilot program, and the precedent that these changes will have on developing a workable approach to next year's 7(a) funding problem created by the President's request for zero funding for fiscal year 2005. The Snowe-Kerry amendment took a much more measured approach to the fee increases, adopting the levels supported in S. 2186 and S. 2193, with flexibility for the SBA to increase the fees up to the levels in the House bill should the need arise to keep the program running for the remainder of the year without restrictions. For example, instead of temporarily charging a lender fee on the commercial portion of a combination or piggyback loan of .5 percent, H.R. 4062 charges 40 percent more, imposing a fee of .7 percent. Senator Snowe devised the discretionary stair-step compromise in our amendment and it was preferred by the lending community. It is unfortunate that the lenders may be required to pay higher fees than necessary to reach the goal: Congress seeks to keep access to 7(a) loans available to small businesses for the rest of this year, fiscal year 2004.
The Snowe-Kerry amendment also took a more measured approach in expanding the SBAExpress program. H.R. 4062 includes a controversial provision proposed by the administration that would expand the current SBAExpress reduced guarantee pilot program from loans of $150,000 to $2 million. An increase of 700 percent.
The administration contends that the pilot expansion would only be voluntary and therefore harmless if not used. While SBAExpress has worked well for relatively small loans, those averaging around $150,000, lenders have testified before our Committee that SBA Express is not workable for all sizes of loans and that the volume of SBAExpress loans is not likely to increase. In fact, the smallest SBA lenders, community banks, have testified that to mandate SBAExpress would drive virtually all community banks from the program. Yet the administration argues this voluntary authority is necessary because, when combined with other program changes, it would reduce the subsidy rate, thereby stretching the 7(a) loan funding, getting the program closer to their latest program volume projections.
This can only be true, however, if the volume of SBAExpress loans increase. To date, the administration has not produced any documentation supporting that contention, and the small business lenders fear that the administration will circumvent the requirement that this be strictly voluntary by showing preferential treatment to lenders who use the SBAExpress program. They believe this will occur in order to steer loans away from the regular program, which has a higher guarantee of 75 percent to 85 percent. Congresswoman Velazquez held strong to including very good provisions aimed at protecting the loan program from such tinkering, and she is to be commended for her effective advocacy. Unfortunately, even with these safeguards, I believe it was premature to enact the administration's SBAExpress proposal until better data could be obtained and analyzed. Further, since H.R. 4062 is a temporary extension of SBA's authority until June 4th, 2004, there would have been time for this and other proposals to be properly vetted and, if appropriate, adopted.
Extreme changes like expanding the SBAExpress program 700 percent were driven by the administration. The groups agreed to live with them only because it was better than the alternatives--further reducing the loan cap from $750,000 to $500,000, another shutdown, or the administration's proposal to mandate all loans be made through the 50 percent guarantee SBAExpress program. Let me read to you a few quotes by the small business community that reflect the feelings of many expressed to this Committee:
The Independent Community Bankers of America: ``The ICBA did not oppose a short-term fix bill that would open up much needed lending to small businesses, but only because the alternative pushed by the SBA was far worse and would have choked off lenders' ability to continue making SBA loans. We didn't want to punish small business because of the unwillingness of the SBA to ask for the funds they knew were needed to keep the 7(a) program viable. This bill is only a short term Band- Aid. The ICBA continues to oppose the SBA's efforts to squeeze the 7(a) program out of existence and hopes a genuine good faith resolution can be part of the FY 2005 budget.''
The American Bankers Association as quoted in the ``American Banker'' on April 1, 2004: ``The need to avoid an even lower loan-size cap is why the ABA supported the compromise, despite having serious reservations about the expansion of the SBAExpress and the additional fees on lenders. `We are not totally pleased with it, but we're not going to write a letter opposing it', said Mr. [James] Ballentine [Director of Community Development]. `We believe the lenders bent over backwards to restart this program, and we've seen very little movement on the part of the Agency.'''
Mr. President, we are all glad that the program is back in business for the rest of the year, particularly for the small businesses that have been hung out to dry since the January shutdown of the program. The delays imposed on the FY2004 fix for the 7(a) loan program were unnecessary. There were several opportunities--bills or amendments-- since March 10th to mitigate the funding shortfall or all together fix it, but they've been blocked or stalled.
Mr. President, waiting has a price. Not only to the qualified small businesses waiting for needed loans and for those who had been promised loans in January only to have the administration abruptly impose a crippling loan cap, but also to the taxpayer. If either of the changes Senator Snowe and I had proposed in our bills, S. 2186 and S. 2193, had been enacted as part of H.R. 3195 in mid-March, we could have saved more than $100,000 a day, leveraging at least another $150 million in small business loans in this fiscal year. These delays are fiscally irresponsible.
The Republican obstructionists will justify their delay tactics by arguing that the earlier bills did not solve the entire funding problem for the rest of the year. However, there are numerous problems with such a claim. One, time was of the essence for the small businesses that had been shutout since January. Two, no one knows if the administration's estimates are accurate and the confidence in the econometric model that predicts future program costs has gone down as a result of the SBA's latest estimates. For example, how could imposing a fee on piggyback loans of .5 percent, a fee that will generate new income for the program, not offset the costs at all? And, if that is true, how could additional savings from increasing that fee by 40 percent, to .7 percent be only one one-hundredth of one percent? I don't know of one lender who believes that claim. Three, it would have been better to take a step in the right direction and immediately reduce the cost of the program to the extent possible in order to stretch the lending dollars. This option would have allowed for future refinements while saving precious appropriated dollars in the process. Four,
there would have been (and still are) several other opportunities to make adjustments later in the fiscal year.
With respect to the other important provisions of H.R. 4062, I am glad that the bill includes my measure from S. 2186 that allows the 504 Loan Guarantee Program to operate through the rest of the fiscal year; however, I am very disappointed that, despite bipartisan support, the Republican leadership refused to include a Snowe-Kerry amendment to promote women in business and safeguard one of their only dedicated resources of support: the nationwide network of women's business centers. The Republicans that blocked our amendment--in support of the administration's policy to eliminate experienced, efficient and effective women's business centers in favor of new and untested centers--are potentially depriving thousands of women in business access to much-needed assistance. The Snowe-Kerry amendment, like S. 2267, would have made a small adjustment to the Women's Business Center program that corrects an outdated funding formula, without added cost to the Treasury. The adjustment would have changed the portion of funding allowed for women's business centers in the sustainability part of the program to keep up with the increasing number of centers that will need funding this fiscal year. Without it, all grants to sustainability centers in 39 States could be cut in half--or worse, 23 experienced centers could lose funding completely. Our amendment was a bipartisan compromise intended to maintain an effective women's business center network; a compromise that was agreed to by Chair Snowe, myself, and the bipartisan leadership of the House Small Business Committee. It was supported by women's groups across the country, and it is my sincere hope that my colleagues in Congress will support this change in the very near future.
I thank the broad coalition of small business trade associations that have worked on the various bills and supported the provisions in my bill, S. 2186: The trade association of Women Impacting Public Policy (WIPP) and the National Association of Women's Business Owners (NAWBO), the National Association of Government Guaranteed Lenders (NAGGL), the American Bankers Association, the Independent Community Bankers Association and the U.S. Chamber of Commerce for endorsing the provisions relating to the 7(a) Loan Guarantee Program; WIPP, NAWBO, and the Association of Women's Business Centers for fully supporting the provisions relating to the Women's Business Centers program, as well as the cosponsors of S. 2186. I think anyone who knows of these groups, their members and their leadership, knows that they work very well with both sides of the aisle and with the leadership of our Committee and also the House Committee on Small Business. Working cooperatively in a bipartisan fashion makes good sense and has long been their practice. We all appreciate their work to fix these problems, and for the contribution they make to cultivating small startup and growing small businesses in our communities.
Mr. President, I ask that several letters addressing the issue at hand be printed in the Record. I thank my colleagues for their support of small businesses and for considering immediate passage of this bill.
The letters follow.
March 10, 2004.
Dear Representative: Today, as the House prepares to vote
on H.R. 3915, we are writing to express our concerns with
this legislation. We are very disappointed that it does not
include a SBA 7(a) program solution. Without a solution the
7(a) program will not be allowed to create much needed jobs
to help our economy.
The SBA's flagship 7(a) loan program, the single largest
provider of long-term start-up and expansion loans to
America's small businesses, has been crippled since the
beginning of this fiscal year, when the SBA temporarily shut
it down due to a funding shortfall. When the Agency reopened
the program a week later, it implemented an artificial loan
cap of $70,000--a reduction of more than 50% of the program's
statutory loan limit of $2 million--and a prohibition on
piggyback loans, which would have allowed lenders to make
loans in excess of a loan cap.
Businesses who had already submitted applications for
loans in excess of the new cap were then told their deals
would not qualify for the program. These applicants had gone
through months of financial planning and had been promised
their loans would be approved. Many had already begun
purchasing equipment and hiring employees. If their deals do
not get done, many will lose earnest money they had taken
from personal savings and retirement plans to inject into
these loans.
Other potential applicants who would ordinarily qualify
for the 7(a) program have since been told there is no
alternative to finance their start-up or expansion. The net
result to these small businesses is a loss of faith in the
U.S. government. The net result to the economy is a loss of
jobs.
A solution to this lingering problem does exist and it has
been communicated to the House Small Business Committee. This
proposal has bipartisan support on the Small Business
Committee, as well as the support of banking and small
business trade groups. The proposed solution would increase
fees for lenders to ensure that there is no budget impact. It
would maintain the 7(a) program. However, H.R. 3915 ignores
this solution.
Without a 7(a) solution, approximately $3 billion in loans
will remain unavailable to small businesses for the remainder
of FY 2004--a net loss of approximately 90,000 jobs. We also
fear that if a swift and equitable solution is not enacted,
many 7(a) lenders will flee the program, leaving a void in
availability of the long-term financing that is so crucial to
small businesses' success.
We request that Congress bolster economic recovery and the
small businesses that drive it by enacting a 7(a) program
solution that has the full support of Congress and the
industry.
Sincerely,
American Bankers Association.
America's Community Bankers.
Independent Community Bankers of America.
National Association of Government Guaranteed Lenders.
The Financial Services Roundtable.
Rep. Betty McCollum (D-MN)
