FOR IMMEDIATE RELEASE  
Tuesday, June 15, 2010

CONTACT: Cullen Schwarz
Office: (202) 225-5802

HOUSE TO VOTE ON PETERS’ SMALL BUSINESS PLAN TODAY

Peters Began Fighting for Plan to Generate Small Business Lending Last Year to Allow Smaller Employers to Innovate and Grow

(Washington, DC) – The U.S. House of Representatives is scheduled to vote today on legislation to support small businesses championed by Representative Gary Peters.  The bill, the Small Business Lending Fund Act of 2010 (H.R. 5297) is comprised of two sections.  The first will promote private sector small business lending using an approach Peters developed and called for last year.  The second, written by Representative Peters, will allow states to create or strengthen existing innovative small business lending programs. 

“Small businesses create two in every three American jobs.  Helping them innovate and expand has got to be our top priority right now,” said Rep. Peters.  “Small business owners across Southeast Michigan tell me they are ready to expand again but cannot because Wall Street banks just aren’t lending to Michigan small businesses.  We need to take action to free our small businesses so they are not reliant on Wall Street to grow.”

“Small businesses like mine can't get the loans they need to innovate and grow and that hurts our economy terribly,” said Karen Teegarden, owner of Karen Teegarden and Associates in Birmingham.  “I’ve actually had to lay people off because I couldn’t get a line of credit to temporarily cover payroll, something that was readily accessible in the past.  A lack of lending is costing us jobs and impeding our recovery and it’s a problem that can’t be solved soon enough.”

“It’s been tough out there, no doubt about that,” said Jim Holland, owner of Holland’s Floral & Gifts in Rochester.  “Sometimes it seems like Washington doesn’t get it.  But I am encouraged about Representative Peters’ proposals.  Getting private small business lending markets moving again will be a tremendous boost to our economy.”

Making it easier to start and grow a small business has been a signature issue for Rep. Peters since becoming Oakland County’s new representative last year.  Peters voted against his party’s second stimulus measure in December because he believed it contained far too little for small businesses.  He then immediately began fighting for an alternative plan which is now embodied in the first title of the legislation being considered today. 

That section of the bill will help small, local private lenders provide credit to small businesses at reasonable terms—while also reducing the deficit.  Under the program, small lenders can access capital from a small business lending fund that must eventually be paid back, with interest.  $30 billion in government capital will generate up to $300 billion in private sector lending to small businesses.  And because the government’s investment will be paid back with interest, the official Congressional Budget Office estimate projects that this plan will reduce the deficit as taxpayers will make $1 billion from the program.

“It isn’t often that an action can spur job growth while saving taxpayers money at the same time,” said Rep. Peters.  “Washington’s focus should be on helping to get the private markets moving again and reducing the deficit, and this common sense plan does both.”

Rep. Peters wrote the second title of the bill and added it as an amendment to the first while it was being considered in the Financial Services Committee.  That title is modeled after legislation previously introduced by Rep. Peters and Reps. Levin and Dingell.  This section of the bill will allow states to create or strengthen existing innovative small business lending programs. 

Michigan has been a national leader in developing small business lending programs such as the Michigan Collateral Support Program and the Michigan Supplier Diversification Fund.  Projections show that these efforts are already responsible for 14,500 more jobs for Michigan and approximately $140 million in private sector capital made available to small businesses. Enactment of Peters’ legislation will allow these efforts to be expanded to generate more private investment and create more jobs.

The House will also vote this week on the Small Business Jobs Tax Relief Act (H.R. 5486).  That legislation will cut capital gains taxes for those who purchase stock in small businesses this year and increases the tax deduction for small business start-up expenses from $5,000 to $20,000.  Rep. Peters has also strongly supported these small business tax cuts.

Background on Title I (based on a plan developed by Rep. Peters last year, officially introduced by Financial Services Committee Chairman Barney Frank):

Title I of the Small Business Lending Fund Act of 2010 (H.R. 5297) delivers loans to small businesses to create jobs through a $30 billion lending fund for small, local community banks ($10 billion or less in assets) that will leverage private sector capital to provide up to $300 billion in small business loans.

• Community banks provide the credit that small businesses need to grow and create jobs in communities across the country but the financial crisis on Wall Street and the recession have diminished these banks’ ability to lend.
   
• CBO estimates that this provision would actually reduce the deficit, saving taxpayers $1 billion over 10 years, as banks are expected to pay back these funds over 10 years with interest.
   
• The bill includes tough performance-based incentives to ensure that these small lenders lend to small business.
  • The banks would repay the government's investment at a dividend rate starting at 5%, with lower interest payments if they expand their small business lending. That rate would drop by 1% for every 2.5% increase in small business lending that the bank shows compared to 2009.  A lender could cut its dividend rate to just 1% by increasing small business loan portfolio by 10%.
     
  • But if the bank reduced its small business lending, its repayment dividend would shoot up as high as 7%.

• The program would only be available to small, local community banks with assets of less than $10 billion—so the giant Wall Street banks that caused the financial crisis that dried up lending in the first place and are again earning enormous profits will not be allowed to participate.

 
Background on Title II (authored by Rep. Peters):

Title II was written by Rep. Peters and is based on the State Small Business Credit Initiative Act (H.R. 5302), introduced by Reps. Peters, Sander Levin and John Dingell.  This section of the bill authorizes two types of state lending programs: Capital Access Programs and “other innovative loan programs.”  Both types of programs efficiently generate large amounts of private financing for small businesses to innovate and create new jobs. 

• Capital Access Programs:  Many companies, especially manufacturers, have seen the value of their assets plummet in recent years.  This means they have less valuable collateral to post, which in turn makes it more difficult for them to secure a loan.  Capital Access Programs create loan portfolio insurance programs for participating financial institutions which are supported by fees paid by the borrower, the lender and the state.  By bolstering the reserve pools that protect lenders from default risk, states are able to help banks and credit unions expand the range of small businesses to which they are willing to lend, providing credit even to businesses struggling with declining asset value.  These programs have already been successfully implemented in about 30 states. 
   
• Other Innovative Loan Programs:  States may develop new programs to bolster small business lending.  A state must establish that, in total, their programs will support at least ten dollars in private lending for every dollar in federal support.  Participating lenders must share in the risk of default with the government.   

These efforts are designed to address the critical reasons why the small business lending market is currently frozen: lack of sufficient capital reserves on the part of lenders and collateral shortfalls on the part of borrowers.  This title allows flexibility for states to develop strategies to promote lending specific to the needs of small businesses in their region. 

Rep. Peters has consistently fought to make Washington give small businesses the support they deserve:

Since becoming Oakland County’s new representative last year, making it easier to start and grow a small business in Michigan has been one of Representative Peters’ top priorities. 

Last year, Rep. Peters convened a field hearing in Southfield so that Members of Congress could hear directly from Oakland County small businesses and community banks about the lack of available capital for business lending in Michigan.  Deputy Secretary of Commerce Dennis Hightower accepted an invitation from Peters last month to visit Oakland County and take part in a roundtable with small businesses.  Peters recently launched a survey of small business owners’ opinions on federal policies to be delivered to congressional leaders and Administration officials.  Earlier this month, he engaged in a small business tour, going door-to-door to talk with small business owners in cities throughout Oakland County.
 
Using the feedback he received from small business owners in Oakland County, Rep. Peters developed a number of proposals to help small businesses innovate and create jobs, such as those being considered by the House this week.  Rep. Peters also wrote and passed a measure to allow small businesses in high unemployment states to access zero-interest loans of up to $75,000, repeatedly supported cutting small business taxes and introduced and passed a bill with Republican Vern Ehlers to reduce costs for small manufacturers participating in the Manufacturing Extension Partnership. 

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