News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release                                                       CONTACT:  Alex Haurek; Duncan Neasham
September 23, 2009                                                                                                        (202) 226-3636

Velázquez on Legislation Extending Expiring SBA Programs

WASHINGTON, DC – Rep. Nydia M. Velázquez (D-NY), the Chairwoman of the House Committee on Small Business, delivered the following remarks today on the floor of the House of Representatives during debate of H.R. 3614, legislation to extend programs of the Small Business Administration:

“The legislation before us will keep a number of vital programs at the Small Business Administration functioning.  This will give us time to complete our work with the Senate and fully reauthorize these measures, which are critical for our nation’s entrepreneurs. 

“All of us recognize the importance of small businesses to our recovery.  Since January, this Congress has taken several steps to help small firms.   Entrepreneurs will see $30 billion in new contracting opportunities from the Recovery Act.   The Recovery Act is expected to yield $21 billion in new lending and investment for small firms.  Since the Recovery Act passed, the SBA has approved $7.3 billion in Recovery loans and supported almost $10 billion in small business lending.

“This extension will not only keep important programs at the SBA running – it will also make some important changes to improve access to capital for small firms. 

“The America’s Recovery Capital program in the Recovery Act provides short term capital for businesses.  To date, the “ARC” loan program has helped 1,600 firms stay afloat with interest-free loans. 

“Currently, ARC loans cannot be used to pay down existing, government-guaranteed debts.  By letting businesses use ARC loans for that purpose, this bill will open the program to even more firms, regardless of their previous financing decisions. 

“This will open up $360 million in lending capital to help stressed small businesses that have 7(a) loans.  Through the ARC program, these firms will receive nearly $6,000 per month, allowing them to redirect their cash flow into sustaining their operations.  The American Bankers Association and the Independent Community Bankers of America strongly support this provision.

“As SBA implements this change, it should also revisit other areas where it can improve the program. A top priority for small businesses is always reducing their paperwork burden. 

“This is the paperwork required to apply for an ARC loan – and it doesn’t even include the documentation that a borrower must submit as part of their application.   Clearly, applying for these loans is complex.  The SBA should streamline its application and approval processes.    Businesses that apply for these loans do so because they need a lifeline – now.  The SBA should make the process fast and simple.

“Another challenge at the agency is the projected default rates for the program, which directly affects the availability of capital.  Unfortunately, the SBA assumed that businesses receiving ARC loans would default more than businesses impacted by Hurricane Katrina.  That calculation doesn’t make sense – and it has limited the loans’ availability.  By developing a subsidy model that better reflects reality, the SBA could ensure more funding goes to businesses, instead of being held in reserve to cover defaults that probably won’t happen.

“Going forward, we need to ensure that the recovery reaches everybody, especially low income communities.  Obviously, these areas have been hit the hardest by the recession.  But, they also hold the highest potential for economic growth.   An important program for accomplishing that goal is the New Market Venture capital program.  This program targets capital to the smallest businesses in economically depressed areas. However, until now, the program limited the amount of capital an entrepreneur can obtain through New Market companies.  This bill simplifies the limits so that more capital will flow to disadvantaged businesses.  Helping these businesses promotes hope and opportunity in low income areas – and further fosters economic recovery.

“Right now, access to capital remains the biggest challenge facing small firms.  Making these minor adjustments to the ARC program and the New Market initiative will improve access to capital for small businesses when they need it most.

“In coming weeks, the Committee will continue working to update the SBA’s programs.  In the meantime, this legislation extends these initiatives and makes two critical changes to help small businesses. I urge my colleagues to vote ‘yes’ and reserve the balance of my time.”

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