News From the
Committee on Small Business
Nydia M. Velázquez, Ranking Democratic Member

For Immediate Release
June 28, 2006

CONTACT: Kate Davis, Allyson Ivins, (202) 225-4038

Small Businesses to See Relief from Increased Costs
Velázquez amendment passes to lower cost of SBA's 7(a) loan program

WASHINGTON - For the thousands of small businesses nationwide that rely on the Small Business Administration's (SBA) 7(a) lending program to start and expand their ventures, some relief came through yesterday when an amendment to the Science, State, Justice and Commerce (SSJC) Appropriations bill successfully passed the House of Representatives to lower the cost of the program. The measure, introduced by Congresswoman Nydia M. Velázquez, Ranking Democrat on the House Small Business Committee, was supported by 20 prominent small business groups, and passed with a vote of 214 to 207, including only 17 Republicans.

"This is a win for the small business community - it is clear that their needs are being heard and that Congress is finally starting to take action to provide them with much needed relief, despite opposition from the Bush administration and Republican Leadership," Congresswoman Velázquez said. "At a time when small businesses are being hit with skyrocketing healthcare and energy costs, this measure is a huge step forward in ensuring they are able to access the capital they need to remain as this nation's main job creators."

The Bush administration eliminated funding for the program two years ago, forcing small businesses to shoulder the cost of the initiative. As a result, entrepreneurs have had to pay additional upfront fees just to use the program. For smaller to mid-size loans the additional fees are anywhere from $1500 to $3000, and for more established businesses the total costs can exceed $50,000. This is money being paid by small businesses directly to the federal government, taking away from resources entrepreneurs could use to invest back into their businesses.

While small businesses have been getting costlier loans, they have also been receiving less capital as a result. The agency did $160 million less for the first half of this year, compared to the same time the previous year, and the program has done nearly a half billion less as compared to the last quarter before the fees were implemented. The decline in capital has hit entrepreneurs nationwide. Women and veteran business owners received $100 million less in lending, and rural businesses were hit particularly hard, receiving $250 million less in the last quarter.

During the floor debate Congresswoman Velázquez also emphasized that small businesses are also getting smaller loans today, lessening their ability to access the level of capital they need in order to start and expand their firms. Loans are 40 percent smaller today as compared to 2000.

"Entrepreneurs have been unrightfully burdened for the past two years now - and it is about time that Congress and the administration start realizing the impact this having not only on our small businesses, but also our economy," Congresswoman Velázquez said. "It is my hope that the Senate will now follow the House's lead in providing some much deserved relief to our nations' small businesses, so our entrepreneurs can carry on as the economic engines of this country."

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