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Access to capital is critical to the success of small businesses. If, as the saying goes, small businesses are the economy’s backbone, then the flow of capital is the lifeblood.  

However, obtaining conventional credit remains a challenge for many small businesses.  Start-ups, in particular, are still considered a risky bet by many lenders. Through the 7(a) program, the SBA helps fill in the gaps in the capital markets, mitigating some of the risk to lenders by guaranteeing that these loans will be repaid. 

In turn, small businesses keep their inventory stocked, their employees paid, and their doors open. In recent years, 7(a) loans have experienced unprecedented growth. In fiscal year 2016, over 64,000 loans totaling $24 billion were supported.

With the prolific growth of the 7(a) program, it is crucial that this initiative functions efficiently and effectively.  For example, though SBA remained under its 7(a) lending authorization last year, it is crucial that SBA closely monitor loan volume -- and communicate to Congress in a timely manner concerns regarding reaching the cap. 

In addition, while the overall number of 7(a) loans has increased, the percentage going to minority and women-owned firms has remained fairly consistent since 2010 -- and is lower than before or during the recession. This disparity is troubling. It must be addressed to enable job creation and economic growth, particularly in traditionally underserved communities.

Other concerns have been raised by both borrowers and lenders alike related to the effectiveness of SBA’s existing technology to facilitate lending. Technology is only helpful if we ensure it works efficiently for lending purposes. 

Recent OIG and GAO reports disclosing weaknesses in SBA’s lender oversight raise other concerns. Their analyses raise questions about whether the agency has adequate tools to manage the program. It is the responsibility of this Committee- and one we take seriously – to examine the internal controls of SBA’s lending programs.  Absent adequate oversight, I am concerned that the program’s resources may be unnecessarily strained -- potentially depriving other entrepreneurs of needed credit.

Overall, this committee seeks to ensure that the 7(a) program works for small business borrowers.  I look forward to hearing from our witnesses today and gaining their insights on how we can improve SBA’s flagship loan program.