WASHINGTON – Today, Rep. Nydia M. Velázquez (D-NY), Ranking Member of the House Small Business Committee, and Rep. Morgan McGarvey (D-KY) penned a letter to the Small Business Administration (SBA) calling on the agency to release detailed information on the 7(a) Loan Program.
During a September hearing with SBA Administrator Isabel Guzman, some committee members discussed the level of loan defaults within the 7(a) program. In the letter, the lawmakers call on the SBA to release detailed information on default rates across 7(a) subprograms and loan types so Congress can examine potential issues in a fact based and data driven manner.
“While we share the potential concern expressed by some of our colleagues, we believe the current overall default rate must be put in context and measured against its historical benchmark to determine whether it is outside the appropriate standard,” wrote the lawmakers. “Moreover, the overall default rate must be broken down and categorized by each of the 7(a)’s sub-programs, loan size, and lender type to provide an accurate representation of the 7(a) Program’s operation.”
The 7(a) Program is the SBA’s primary small business lending program, assisting small businesses with financing when they are unable to attain credit elsewhere. The 7(a) Program operates at zero-subsidy, costing the American taxpayers no money to operate. A zero-subsidy rate occurs when the program generates sufficient revenue through fee collection and recovery of collateral on defaulted loans so as not to require a Congressional appropriation to issue new loan guarantees.
“The SBA’s 7(a) Program encourages lenders to provide America’s small businesses with the capital they need to enable them to grow and create jobs,” wrote the lawmakers. “While it is necessary to create more lending opportunities for underserved businesses unable to access capital elsewhere, we must balance this effort with the responsibility of ensuring the program’s default rate maintains its historically appropriate standard. Doing so is vital to the continued success of the program.”
