Small Business Access to Capital Act of 2009

Mr. President, since Congress passed and the President signed the American Recovery and Reinvestment Act in February, more than 33,000 loans--nearly $13 billion--have gotten into the hands of entrepreneurs, helping to give more small businesses the capital they need to stock their shelves and pay their employees while creating or saving 325,000 jobs at a critical time. But as President Obama said yesterday, we must do everything in our power to help our nation's innovators and job creators to ensure their success and our nation's economy and future competitiveness.

Ensuring that small businesses have greater access to capital is the first, and perhaps most critical, step. In hearings, roundtables and other meetings with small business owners and lenders, I have heard time and time again that the current small business loan limits do not adequately meet their needs. To answer their urgent call for help, I am here today to introduce S. 1832, The Small Business Access to Capital Act of 2009. Senate

Small Business Committee and Entrepreneurship members Senators John Kerry of Massachusetts, Tom Harkin of Iowa, Ben Cardin of Maryland and Jeanne Shaheen of New Hampshire, along with Senators Barbara Boxer of California and Bob Casey of Pennsylvania, have joined me as cosponsors of this bill.

The Small Business Access to Capital Act of 2009 contains several of the initiatives President Obama highlighted in his speech yesterday, including raising the limits on SBA loans to as high as $5.5 million. Coupled with lower-cost capital available to community lenders, these higher loan limits will further spur small business growth and aid in our nation's continued economic recovery.

I have made increasing access to capital for small businesses a top priority within my Committee since the day I became Chair, leading my first Committee event on this topic in January. Since that first roundtable, Senator Snowe and I helped pass the Recovery Act's small business provisions that eliminated SBA loan fees for borrowers to make capital more affordable, increased the loan guarantees on SBA's largest loan program to reduce risk for banks and encourage them to lend when the economy was at its worst, and created initiatives to help unfreeze the secondary market for SBA loans so that banks would have more capital to lend small businesses. These provisions, as I mentioned earlier, helped some 33,000 businesses receive $13 billion in capital, saving or creating 325,000 jobs.

I have also held four additional hearings and roundtables focused on increasing access to capital for entrepreneurs. Most recently, an oversight hearing on October 6 focused on what in the Recovery Act has been implemented and what additional steps Congress needs to take. Increasing loan limits was a main focus.

In addition to making greater access to capital a top priority since and prior to my becoming Chair, I have specifically supported increasing the loan limits for the past two Congresses, voting favorably for this increase in the last two SBA reauthorization bills out of the Senate Small Business Committee. My bill goes above and beyond these increases because in this recession small business needs are greater than ever before, and the programs have not been updated in many years.

The bill I am introducing today increases the maximum 7(a) loan from $2 million to $5 million, increases the maximum 504 loan from $1.5 million to $5.5 million, and the maximum microloan from $35,000 to $50,000. These are all provisions that have been championed by my colleague and Ranking Member, Olympia Snowe, in S.1615, the Next Steps for Main Street Act. Additionally, the bill includes a provision to allow businesses to use 504 loan guarantees to refinance existing business debt and allows microloan intermediaries to have greater access to technical assistance grants. The bill also increases the amount that a New Market Venture Capital Company can invest in any one company, helping fast-growing businesses located in areas with chronic underemployment.

The Recovery Act included a controversial provision that exempts the National Institutes of Science (NIH) from participating in the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. This provision could cost small businesses as much as $230 million in lost r&d work, impacting the development of needed military and medical technologies and therapies. In addition, it directly counters the goals of the Recovery Act to create high-paying jobs, spur innovation and boost America's competitiveness. This bill contains a provision to correct this unfair exemption by requiring NIH to obligate $150 million of the Recovery funds it received to be used for SBIR and STTR projects.

Last, the bill amends the America's Recovery Capital (ARC) loan program, enacted as part of the Recovery Act, so that businesses with existing SBA 7(a) loans can access this financing. The temporary ARC program offers interest-free loans to viable small businesses, which carry a 100-percent guaranty from the SBA to the lender and require no fees paid to SBA. Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years.

With small businesses making up the largest source of employment in this country, and the national unemployment rate still too high, changes like these are vital to the success of our small businesses and the competitiveness of our nation. I look forward to working with President Obama and his Administration, Ranking Member Snowe and my Senate and House colleagues to quickly pass this critical legislation and send to the President for signature.

Mr. President, we all know the statistics are bleak. Unemployment is at 10 percent, more than 7 million Americans have lost their jobs since the start of this current recession, and the National Federation of Independent Businesses' Optimism Index, a compilation of 10 survey indicators, is at 88.3, a number the NFIB calls ``stuck at recession levels.'' These statistics, and the stories they represent present Congress with myriad challenges including: What will we do to lower unemployment, create jobs, and help our small businesses to grow again?

The legislation Chair Landrieu and I are introducing today, the Small Business Job Creation and Access to Capital Act of 2009, aims to meet this challenge and takes the best ideas from Republicans and Democrats, to help put American small businesses back to work. I would especially like to thank the Chair for working with me in such an open manner in developing this bill. Creating jobs and helping small businesses should not be a partisan issue and the Chair has been extremely open to my suggestions, incorporating many of the provisions I originally introduced in the Small Business Lending Improvement Act, the 10 Steps for a Main Street Economic Recovery Act, and the Next Step for a Main Street Economic Recovery Act into this legislation.

In the past year, one cornerstone of small business recovery has been Small Business Administration, SBA, backed lending. Last year, to help address the chronic shortage of capital for small business borrowers, I introduced the 10 Steps for a Main Street Economic Recovery Act. Many of the provisions in this legislation were included in the American Recovery and Reinvestment Act and some have been credited with helping to increase SBA loan volume 79 percent.

One provision which has been extremely popular has been fee reductions for 7(a) and 504 loans. In fact, at a round table on reauthorizing the SBA's access to capital programs the Senate Committee on Small Business and Entrepreneurship heard from Mr. Michael Heath, the owner of Ramunto's Brick Oven Pizza in St. Johnsbury, Vermont. Mr. Heath told the Committee that the funds he saved in SBA fee reductions helped him buy his pizzeria. The bill we are introducing today would extend the fee reductions I originally proposed in 10 Steps to December 31st, 2010. This critical step ensures that we can continue to help entrepreneurs like Mike open businesses on Main Streets across America.

Another vital provision contained in this legislation expands the number of

businesses eligible for SBA-backed loans and expands the size of those loans. I originally proposed this idea in the Small Business Lending Improvement Act which calls for an alternative size standard that would help more small businesses meet the SBA's requirements to access SBA- backed loans, and also included it in the Next Step for Main Street Credit Availability Act, which includes provisions allowing borrowers to take out larger 7(a) loans, microloans, and 504 loans. President Obama has also recognized the need for larger loan sizes and has advocated for this position as a way to create jobs and help small businesses.

Underscoring the inadequate size of SBA loans, I heard testimony earlier this year at a field hearing Senator Shaheen and I held in Portland, Maine from Mr. Richard Pfeffer, a local business owner, on how small SBA loan sizes have directly impacted his business. Mr. Pfeffer testified that his two businesses, Aroostook Starch and Gritty McDuff's, a restaurant and pub regarded by many as a Portland landmark, were close to bankruptcy not because of the economic downturn, but rather because of his inability to access larger SBA loans. Mr. Pfeffer is still in business today, and Gritty's is now serving its famous Christmas Ale, but his inability to access capital still looms and it is costing him the opportunity to expand his business and hire more workers. The increased loan limits in this bill would help Mr. Pfeffer and others like him to put the American economy back on track.

This bill also includes another provision I proposed in March and introduced in my Next Steps legislation that would allow SBA borrowers to shop and compare SBA loan rates online, offering borrowers the opportunity to make an informed choice and save time and money.

Finally, the Small Business Job Creation and Access to Capital Act of 2009 would allow borrowers of 504 loans to refinance their debt. This provision will give borrowers critical working capital that they can use to grow and expand their businesses.

These targeted reforms will help put Americans back to work, ease the capital crunch for small businesses, and help bring SBA lending into the future. I urge my colleagues to support this critical legislation to improve America's economy and increase small business lending.

Mr. President, I rise today to introduce two pieces of legislation to address gaps in our preparedness and ability to respond to widespread infectious disease outbreaks and biological attacks.

The H1N1 outbreak demonstrated to us how investments in pandemic preparedness activities, such as the creation of pandemic influenza strategies, can lessen the effects of a pandemic and improve our response. However, we have learned from the H1N1 pandemic that we still have gaps in our ability to prepare for and respond to these types of events and that state and local entities are uncertain in their abilities to respond to a more severe event.

Apart from shortcomings in government coordination and planning, there is also a glaring deficiency in an important statute that underpins our nation's response to disasters. When a natural disaster such as flooding in Arkansas occurs, local and State government resources can be quickly overextended. When that occurs a governor can request and the President can issue a major disaster declaration, which triggers the maximum amount of resources from the Federal disaster response system.

Sometimes the system works well and other times not as well, but we know for certain that without a disaster declaration and effective Federal intervention a natural disaster can have devastating effects on life, property, and our economy.

Unfortunately, due to a lack of clarification of the definition of a major disaster in the Stafford Act, there is no precedent for the President to issue a major disaster declaration when local medical resources are overwhelmed by the exponential spread of life-threatening diseases, or alternatively, a deliberate biological attack by terrorists. The bills that I am introducing today will help to address preparedness shortcomings as well as the deficiency in law.

My first bill, S. 2863, entitled The Emergency Response Act, addresses this shortcoming in law. It will ensure the Federal Government can provide the maximum amount of support to State and local governments by allowing pandemics, acts of terrorism or other man-made disasters to be considered a major disaster under the Stafford Act. This clarification in law will permit the President to issue a major disaster declaration and allow Federal agencies to coordinate their efforts, give technical assistance, give advisory assistance, and work with local authorities and people in the private sector for events such as pandemics, biological attacks or chemical releases.

The second bill, S. 2864, entitled The Defense Against Infectious Disease Act, requires the Federal government to periodically update the National Strategy for Pandemic Influenza and the National Pandemic Implementation plan with the assistance of State, Local and Tribal stakeholders in order to ensure our preparedness plans are up to date and incorporate the latest technologies, medical developments and logistical challenges.

This bill addresses concerns raised by the U.S. Government Accountability Office about both the completeness of these emergency plans and the need for them to be updated. Most Americans may not even know that these emergency plans exist, but they do understand that strong planning is the foundation for effective action. An out-of-date plan is not a plan, and after watching the spread of H1N1 and the missteps in our government's response, Americans can easily imagine what it would be like in the event of an even more serious disease outbreak, and the importance of planning for such an emergency.

This bill will also help address the situation I described previously in which a severe infectious disease outbreak can overwhelm our local medical facilities, many of which have limited resources to handle even their every day needs. To address situations which will over extend local resources, my bill also requires the Federal Government to identify alternative medical care facilities and other resources such as medical equipment, daily supplies and personnel to ensure we know what assets we have to help State and local communities.

The idea here is preparation. We should make the best of the H1N1 outbreak and learn from this experience. That is why I introduced the Emergency Response Act and the Defense Against Infectious Diseases Act. I ask that my colleagues support these bills to ensure that we are prepared for the next pandemic.

Mr. President, I ask unanimous consent that a bill summary be printed in the Record.

Mr. President, our Nation's small businesses have created 64 percent of all new jobs in the last 15 years, yet in the last year nearly 85 percent of the jobs lost have come from small businesses. To reverse this job loss trend and allow small businesses to be the engine of economic growth once again, we must make sure they have the access to capital they need to be successful and help grow our economy.

That is exactly why I, along with the ranking member of the Small Business Committee, Olympia Snowe of Maine, am introducing the Small Business Job Creation and Access to Capital Act of 2009. This bipartisan legislation is a result of five hearings and roundtables in the Small Business Committee this year as well as numerous meetings with small business owners. It builds off of S. 1832, the Small Business Access to Capital Act of 2009, and S. 1615, the Next Step for Main Street Credit Availability Act of 2009, legislation Senator Snowe and I have previously introduced.

This legislation enhances the ability of the SBA to support larger loans and provide more options to small businesses. As many other sources of capital have evaporated, loans guaranteed by the SBA, with support of funding through the Recovery Act, have been able to support $16.5 billion in loans to small businesses. Specifically, this act would: increase the loan limit on 7(a) loans from $2 million to $5 million; increase the loan limit on 504 loans from $1.5 million to $5.5 million; increase the loan limit on microloans from $35,000 to $50,000, as well as increase the loan limit to microloan intermediaries from $3.5 million to $5 million; allow the 504 loan program to refinance short-term commercial real estate debt into long-term, fixed rate loans; extend the authorization to provide 90 percent guarantees on 7(a) loans and fee elimination for borrowers on 7(a) and 504 loans through December 31, 2010; and direct the SBA to create a website where small businesses can identify lenders in their communities.

These provisions will have an immediate impact on increasing the availability of credit for small businesses and spurring job growth, with many of these provisions coming at little or no cost to the government. For example, the SBA estimates that the loan limit increases will be budget neutral, but will increase SBA lending by $5 billion next year alone. The refinancing provisions could help save 60,000 jobs next year by allowing small businesses to refinance short- term commercial real estate debt into long-term fixed rate mortgages. To ensure that this program is budget neutral we have included a provision that would require any additional cost created by the program to be funded by the fees of the participants. Additionally, we have placed a number of safeguards on this program, such as requiring that the refinanced loan be current for at least one year, that the business owner invest a minimum of 20 percent equity and that the availability of funds be capped at $65,000 for every job retained.

The extension of the 90 percent guarantees on 7(a) loan and the fee elimination for borrowers on traditional 504 and 7(a) loans extends critical provisions in the Recovery Act. This legislation does not include the appropriations for this funding, but does provide an extension of its authorization should appropriations be made available. It is estimated that if an additional $479 million were to be appropriated for these programs, the SBA would be able to support $18.5 billion in lending to small businesses. Alternately, we are starting to see the impact of this funding not being available. In the first full week of lending since the SBA had to create a waiting list for the final Recovery Act funding, 7(a) loan volume fell from $985 million in the last week of the full funding being available, to $71 million. This $71 million in loan volume is lower than the average weekly volume we were experiencing before the Recovery Act was approved. We also know that as of today there are more than 700 small businesses in the SBA waiting list approved for $350 million in loans if we made more funding available.

It is clear that now is the time to act. Our Nation's small businesses need access to capital and this bill helps facilitate this crucial need.