Kerry Unveils Plan to Improve Small Business Lending Programs With access to capital regularly cited as a top concern among small business owners, Sen. John Kerry (D-Mass.), ranking Democrat on the Committee on Small Business and Entrepreneurship, recently introduced two pieces of legislation to expand and improve the Small Business Administration’s (SBA) two largest lending programs.
Kerry was joined by Sens. Mary Landrieu (D-La.) and Mark Pryor (D-Ark.) on the 7(a) Loan Program legislation and was joined by Pryor on the 504 Loan Program legislation.
Kerry included a new proposal to give minority small firm owners an advocate in the SBA by creating an Office of Minority Small Business Development. The 7(a) program guarantees loans for qualified small businesses that would not be eligible for financing through normal channels. The 504 program promotes community economic development through long-term financing for small businesses to buy real estate or large equipment in order to expand and modernize their facilities.
Last year, more than 105,000 small businesses received $27 billion in 7(a) and 504 loans, creating or retaining an estimated 605,000 jobs. Unfortunately, the proportion of 7(a) loan dollars to minorities and women has been mostly stagnant. Over the last five years, 504 loans have slightly increased to Hispanics and Asians, but have remained the same for African-Americans and decreased for women.
Kerry’s legislation to improve the 7(a) Loan Program includes the following provisions:
Authorizes the government to guarantee nearly $60 billion in 7(a) loans over three years, specifically:
$18.5 billion for 2007
$19.5 billion for 2008
$20.5 billion for 2009
Creates an Office of Minority Small Business Development in the SBA, similar to the agency’s existing offices that focus on veterans and women, with an annual budget and requirements to monitor the outcome of SBA’s programs and ensure the SBA’s state offices have money to market to minorities.
Creates a National Preferred Lenders Program to reduce the paperwork and streamline the approval process for lenders who have already demonstrated proficiency in making, closing, servicing, and liquidating loans and want to reach more borrowers by lending in many states.
Establishes eligibility criteria and holds lenders accountable if they fail to meet the criteria.
Kerry’s legislation to improve the 504 Loan Program renames it as the Certified Development Company Economic Development Loan Program and includes the following provisions:
Authorizes the government to guarantee nearly $30 billion in 504 loans over three years, specifically:
$8.5 billion for 2007
$9.5 billion for 2008
$10.5 billion for 2009
Promotes expansion of Certified Development Companies (CDCs) in more communities, sets a new policy goal of expanding businesses in low-income communities, and defines the mission of CDCs.
Sets accountability measures for CDCs by requiring annual reporting of all economic development activities in each state where they operate.
Allows borrowers to save money by applying equity beyond the 15% to 20% required for special use or start up projects to the less expensive, long-term financing part of the loan. |
