WASHINGTON, D.C. -Rep. Nydia Velázquez (D-NY), the Chairwoman of the House Committee on Small Business, released the following statement following passage of the American Recovery and Reinvestment Act:
“The passage of this legislation is a victory for struggling entrepreneurs. America’s small businesses have led our nation out of previous economic downturns and, given the right tools, they can do so again.
“This package will use the Small Business Administration (SBA) to help small firms in three key ways.
“First, this legislation will make affordable credit available to small businesses. The legislation will reduce to zero the fees on SBA-backed loans. This will immediately make credit more affordable for small firms. Importantly, we were able to ensure the priority for the fee reduction program is small business owners.
“In addition, the legislation raises the portion of a loan that the Small Business Administration may guarantee. Raising the guarantee directly encourages banks to lend, opening lines of credit to small businesses.
“The bill also contains provisions to unfreeze the secondary market for SBA-backed loans. With the secondary market frozen, banks have been stuck with loans on their books, preventing them from lending to small businesses. Fixing the secondary market will allow credit to flow and small firms to make investments that create jobs.
“Second, the bill will help small firms that are struggling with existing debt. The measure will establish a new ‘Small Business Stabilization Financing Program’ program at SBA. This program will provide crucial support to those small businesses that are having trouble making payments. Our Committee has heard from many firms who could be viable and grow again if they could only buy a little time. This new program was designed with these firms in mind. The conference report will also allow small firms to refinance existing debt through the SBA’s 504 lending program. This will make debt more manageable for struggling firms.
“Third, the legislation will spur investment in high-growth, small firms. Specifically, the bill will streamline the Small Business Investment Company (SBIC) program to allow them to invest more flexibly. Simply put, SBIC’s will be able to invest more in firms already in their portfolios and expand their portfolios to invest in more firms.
“Taken together, these initiatives are expected to result in nearly $21 billion in new investments and lending for small businesses, spurring the creation of 634,000 jobs.
“Last, but certainly not least, the recovery package targets much need tax relief to cash-strapped businesses. This will put more money into the hands of small businesses, this year, so they can grow and create jobs.
“All of these are important and necessary steps, and I look forward to seeing this bill enacted. Still, more must be done. In coming weeks, our Committee will continue working to assist small firms. They are the backbone of our economy and we must continue fighting for them in Washington.”
Small business provisions in the conference report for H.R. 1 will:
- Reduce to zero fees on SBA-backed loans. At the urging of House Members, the conference report includes language requiring that fee reductions go to small business borrowers.
- Raise the percentage of a loan that the Small Business Administration (SBA) may guarantee from 85 percent to 90 percent, encouraging banks and private lenders to reenter the market for SBA-backed loans.
- Establish a new “Small Business Stabilization Financing Program” that will allow SBA to make no interest loans to firms that are struggling to make payments on existing debt.
- Unfreeze the secondary market by allowing “broker-dealers” of SBA-backed loans to take out additional loans from SBA in order to purchase additional loans off banks’ books. This will provide banks with liquidity so they can lend to small businesses again.
- Allow SBA to guarantee existing debts in loan pools that are currently unguaranteed. This, too, will provide liquidity in the secondary market so that banks begin lending again.
- Allow small businesses to refinance existing debts under the SBA’s 504 program.
- Streamline the Small Business Investment Company (SBIC) program to provide fast growing companies with equity capital they need to grow and create jobs.
- Ensure oversight by requiring the Government Accountability Office (GAO) to report to Congress on the implementation of the small business lending provisions in the stimulus.
- Provide $15 million to the SBA’s surety bond program, including larger bonding authority, to help small firms obtain construction related projects.
Provide $30 million for the SBA’s microloan program, which provides loans and technical assistance for low income entrepreneurs and laid-off workers who are starting their own business.