Ranking Member Velázquez on the Impact of a Potential Republican Default on Small Businesses
Washington, May 25, 2023
Washington D.C.— Today, House Small Business Committee Ranking Member Nydia M. Velázquez (D-NY) issued the following statement in response to Republican brinksmanship around raising the debt ceiling:
“Under the Biden Administration, American small businesses have experienced a remarkable recovery from the COVID-19 pandemic. Since the President took office, entrepreneurs have filed a record 10.5 million new business applications, the largest number on record for a two-year period. In turn, small businesses have created new jobs at record rates. Unfortunately, Republicans seem intent on destroying this progress with reckless threats of defaulting on our national debt and throwing our economy into chaos.
“Every year, Main Street American businesses from restaurants to childcare providers to small manufacturers rely on SBA loans for a collective $40 billion in affordable working capital—allowing them to purchase inventory, grow, and hire. If the U.S. breaches the debt ceiling, this critical support to Main Street businesses is in jeopardy. Credit markets, which are critical to keeping the nation’s small firms growing and operating, will be frozen and bond rates will skyrocket.
“The basic functioning of SBA’s lending programs– from loan originations, secondary market sales and loan pooling to debenture sales and portfolio servicing actions – are at risk. Small businesses will face higher interest rates and more expensive loans, which could lead to increased defaults and result in the SBA fulfilling its loan guaranty at higher levels.
“With those critical SBA support functions in question, the crippling of credit markets and a threat of a deep recession, all SBA business lending would be at risk. A default could take billions of dollars in potential SBA loans off the table. Every district faces its small employers and entrepreneurs seeing fewer SBA loans to support economic growth and job creation.
“A Republican default stands to hurt underserved businesses the most. Firms owned by women, minorities, and veterans and those located in rural areas already face systemic challenges when securing a loan. Research shows that firms owned by people of color are less likely than white-owned firms to be approved for loans, lines of credit, and cash advances across banks and non-bank lenders. A debt ceiling breach would make it even harder for these businesses to obtain capital and harm our entrepreneurial ecosystem.
“Polling shows that sixty-five percent of small business owners say they will be negatively impacted if Congress fails to raise the debt ceiling. These businesses are the lifeblood of our economy. As Republicans hold our economy hostage, the livelihoods of over 33 million small business owners across the country hang in the balance. It’s time for Republicans to stop playing political games and start delivering for entrepreneurs by raising the debt ceiling.”