Mr. Chairman, I rise in support of the amendment to H.R. 5672, the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2007, offered by the gentlelady from New York (Ms. Velazquez) that would lower the fees…
Mr. Chairman, I rise in support of the amendment to H.R. 5672, the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2007, offered by the gentlelady from New York (Ms. Velazquez) that would lower the fees associated with the U.S. Small Business Administration's 7(a) loan program and ensure that the program continues as a public-private partnership. The 7(a) program is an important financing mechanism relied upon by entrepreneurs to gain access to lifeblood capital they need to strengthen, diversify, and expand their businesses and to hire new employees.
Small businesses are particularly vulnerable to failure due to the difficulty in accessing capital, especially during a firm's formative stages. Most banks look upon making seed loans to small businesses as risky. Entrepreneurs, as a result, are left without the resources to afford to buy new equipment, hire new employees, and make other necessary operational investments in their businesses. These are the investments that are necessary to strengthen and grow businesses.
The 7(a) program was designed and has been implemented specifically to address this gap in access to capital for American entrepreneurs. The program provides funding to underwrite loans made by local banks to small businesses. Funds provided through the 7(a) program relieved banks of the risks associated with lending to start-up small firms. In turn, small business gained access to important capital markets.
Integral to the 7(a) program was the approximately $79 million provided annually to offset a large portion of the fees charged to small business borrowers associated with their loans. These fees are paid upfront during the loan process. These fees present small businesses, especially cash-strapped start-ups, with a potentially prohibitive cost to accessing capital. The Administration has zeroed out this aspect of the 7(a) program in its budget proposals for fiscal years 2005, 2006 and 2007. Entrepreneurs wishing to borrow under the 7(a) program now pay the full amount of the fees associated with their loans, raising the barrier to capital for at-need companies.
In fact, small businesses on Guam paid $17,862 more in fee costs on the 57 loans made to them during fiscal year 2005. This is nearly $18,000 above what they would have paid during fiscal year 2004 on the same 57 loans. This additional amount is the direct result of the Administration cutting this aspect of 7(a) program funding. That is almost $18,000 dollars that small businesses in my district were unable to invest in equipment, training, salaries and other necessary operating costs.
The amendment before us today would restore $40 million of the approximately $79 million previously needed to offset fees associated with loans made under the authorities of the 7(a) program. This amount would significantly reduce the amounts small business owners are paying to receive 7(a) program loans. This amendment would not, however, reduce fee amounts to fiscal year 2004 levels. The U.S. Small Business Administration budget has been reduced significantly under the current Administration. It is becoming increasingly difficult to find offsets within the lean U.S. Small Business Administration budget to pay for necessary amendments such as this one.
Congress has shown bipartisan support for similar amendments in previous years. I urge my colleagues' support again this year. By supporting this amendment you will help ease the financial burdens on American small businessmen and women, so that they can continue their hard work driving our country's economy, producing innovative goods and services, and creating good jobs for America's talented workers.
I urge my colleagues' support for the Velaquez amendment.