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STATEMENT

Congresswoman Nydia Velazquez, Ranking Member

House Committee on Small Business

“Strengthening SBA’s 7(a) Loan Program”

January 17, 2018

All of us are acutely aware of the vital role access to capital has in the success of our nation’s 29 million small businesses. Without it, they can’t stock their shelves, pay their employees, or upgrade equipment. Capital is the key to unlocking opportunities to grow and create new jobs in the local economy.

A vital pathway to accessing that capital is through the 7(a) loan program – SBA’s flagship lending product. 

At the beginning of this Congress, our committee held a series of hearings to “take the temperature” of the 7(a) program, by looking at how it is being used and administered. 

The good news is, it is as successful as ever. In 2017, the program made 62,400 loans totaling $25.4 billion - an all-time high. At the same time, defaults are at historic lows. 

Conventional lending to small businesses has yet to return to its prerecession peak, however, making the 7(a) program all the more important to driving economic growth.

The 7(a) program is not without shortcomings. Both lenders and the Agency have said oversight could be improved, the oversight toolbox made more robust, and transparency increased with legislative action. This Committee heard you and set out to address your concerns.

The Small Business 7(a) Lender Oversight Reform Act of 2018 addresses a number of issues and makes long overdue reforms to the program.

The Act codifies the Office of Credit Risk Management and Lender Oversight Committee, and outlines the key employees and duties of each.  It also requires the Office to internally submit a budget to ensure there’s justification of the fees, salaries, and expenses used to carry out oversight functions. These reforms ensure the oversight process will have transparency and uniformity for both lenders and the SBA.

We also heard that the credit elsewhere test - a bedrock of the program - was not clear enough and lacked an SBA verification component. This bill better articulates the characteristics of the credit elsewhere test and bolsters verification of how it is fulfilled.

Finally, we all remember 2015 when the program ran out of authority to lend before the end of the year. This created an artificial run on the lenders to get loans approved, unfairly harmed small businesses that needed credit and, ultimately, required Congressional intervention. 

Today’s bill incorporates provisions from legislation I introduced earlier this year empowering the SBA Administrator to request additional lending capacity from Congress to meet unexpected demand late in a fiscal year.

With the improvements offered by the Chairman, this streamlined process strikes a commonsense balance between Congressional oversight and ensuring SBA can keep making loans to deserving businesses that can’t get credit elsewhere.

I want to thank Chairman Chabot and his staff for working in such a collaborative manner on this bill. I also want to thank Senators Risch and Shaheen and their staffs for making this process both bipartisan and bicameral. Through debate and compromise we arrived with a legislative product we can all be proud of.  

Administrator McMahon and her team - and the trade organizations testifying today - were also vital in crafting this bill and we greatly appreciate your input. 

With that, let me thank our witnesses for being here today to continue this discussion.  I look forward to hearing today’s testimony.