Senator Kerry Proposes Broad Expansion, Government Funding of SBA Programs
WASHINGTON - Two new bills introduced by Senator John Kerry (D-Mass.) would greatly expand the Small Business Administration's two largest lending programs. The bills were introduced by Kerry April 6 and were co-sponsored by Senators Mary Landrieu (D-La.) and Mark Pryor (D-Ark.) on the 7(a) loan program legislation. Pryor co-endorsed...
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WASHINGTON – Two new bills introduced by Senator John Kerry (D-Mass.) would greatly expand the Small Business Administration’s two largest lending programs. The bills were introduced by Kerry April 6 and were co-sponsored by Senators Mary Landrieu (D-La.) and Mark Pryor (D-Ark.) on the 7(a) loan program legislation. Pryor co-endorsed the 504 loan program legislation. One of Kerry’s bills would authorize the government to guarantee nearly $60 billion in 7(a) loans over three years – $18.5 billion for 2007; $19.5 billion for 2008; and $20.5 billion for 2009. The bill also calls for allowing small businesses that need both working capital under the 7(a) program and fixed asset financing under the 504 program to be eligible to receive maximum loan amounts under both programs so they are not forced to choose between them, Kerry said. While the SBA has offices geared towards veterans and women, Kerry has proposed the creation of an Office of Minority Small Business Development in the SBA, 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. The legislation also aims to create 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. Kerry also wants to establish eligibility criteria and hold lenders accountable if they fail to meet the criteria. Within the 504 loan program, Kerry’s other bill would authorize the government to guarantee nearly $30 billion in 504 loans over three years, specifically $8.5 billion for 2007, $9.5 billion for 2008 and $10.5 billion for 2009. If passed, the bill would promote the expansion of Certified Development Companies or CDCs in more communities, set a new policy goal of expanding businesses in low-income communities, and define the mission of CDCs. Kerry’s proposal would also allow borrowers to save money by applying equity beyond the 15-20% required for special use or start up projects to the “less expensive,” long-term financing part of the 504 loan. Loan size for businesses owned by veterans, minorities, and women would increase if the bill passes and the “participation fee” lenders already pass on to borrowers would be eliminated and replaced with a split fee between the CDC and small business. Another proposal for the 504 program would permit CDCs to foreclose and liquidate defaulted loans and directs the SBA to develop a program for compensating CDCs for expenses incurred. According to Kerry, in 2005, more than 105,000 small businesses received $27 billion in 7(a) and 504 loans, creating or retaining an estimated 605,000 jobs. He said, “Unfortunately, the proportion of 7(a) loan dollars to minorities and women has been mostly stagnant.” Over the last five years, Kerry said, 504 loans have slightly increased to Hispanics and Asians, but have remained the same for African Americans and decreased for women. -
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