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Includes Velázquez Provision to Keep Loans Flowing to Small Firms

In a hearing today before the House Small Business Committee, Members of Congress began reviewing bipartisan legislation to strengthen and improve the Small Business Administration’s flagship lending program. Lawmakers heard from a range of lenders and industry witnesses who testified on how the bill, H.R.4743, the “Small Business 7(a) Lender Oversight Reform Act” could improve the flow of capital to entrepreneurs.  

“Without access to affordable credit, small businesses can’t stock their shelves, upgrade equipment or expand their operations, creating jobs along the way,” said Rep. Nydia M. Velázquez (D-NY), the Committee’s top Democrat. “The SBA’s 7(a) initiative is an important mechanism for helping firms access capital and the legislation we are discussing today will help ensure this initiative fires on all cylinders, ensuring more entrepreneurs can secure financing.”

Lawmakers noted that the 7(a) program – which provides government guarantees for loans provided to small businesses by private lenders – has reached record volumes.  In 2017, the program made 62,400 loans totaling $25.4 billion - an all-time high. At the same time, conventional loans to small firms have not rebounded at the same rate as loans for larger companies, underscoring the 7(a) program’s continued importance.  

The bipartisan bill discussed today would institute several reforms to the program. Notably, it contains a provision, based on previous legislation authored by Velázquez, that would authorize the SBA Administrator to request additional lending capacity from Congress to meet unexpected demand late in a fiscal year.  In 2015, the program reached its lending cap, resulting in a suspension of small business lending before Congress ultimately intervened, raising the cap.  

“When SBA-backed loans stopped flowing in 2015, many entrepreneurs had to put on hold plans to expand and create jobs,” noted Velázquez. “This bill will prevent us from running into that problem in the future and ensure a steady flow of credit to Main Street small businesses.”

Other changes in the bill would improve the “credit elsewhere” test, which ensures the 7(a) program serves small businesses who struggle to secure loans from conventional lenders. The Act would also improve transparency in the 7(a) program by codifying the Office of Credit Risk Management and Lender Oversight Committee, and requiring the Office to submit a budget justifying the fees, salaries, and expenses used to carry out oversight functions. 

H.R. 4743 and its identical Senate companion bill were collaboratively developed by Velázquez, Rep. Steve Chabot (R-OH), the Chair of the House Small Business Committee, and Senators Risch (R-ID) and Shaheen (D-NH), the Chairman and Ranking Member of the Senate Committee on Small Business and Entrepreneurship.  

“This bill makes commonsense reforms that will benefit small firms and their employees,” Velázquez concluded. “Today’s hearing provided important industry insight on the bill and I’m pleased that, overall, the response to these proposals was remarkably positive.  I look forward to working with Chairman Chabot in coming weeks to move this bill toward enactment.” 

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