Friday, October 24, 2008

Policy Tracker

Bill to boost SBA loans fails in Senate

Congress considered, but failed to enact, legislation to strengthen the Small Business Administration’s loan programs.

Lending through the SBA’s primary loan programs dropped significantly in fiscal 2008, which ended Sept. 30. The SBA approved 69,434 7(a) business loans, down 30 percent from the previous year. Total dollar volume was $12.7 billion, down 11 percent. The number of 504 loans, which finance real estate and other fixed assets, dropped 17 percent to 8,883 in 2008 and the dollar amount fell 16 percent to $5.3 billion.

The House passed legislation Sept. 29 on a 374-6 vote that would enable more businesses to be eligible for 7(a) loans and would make changes in the 504 program that were sought by the certified development companies that make 504 loans. The bill also would make it easier for small business investment companies to determine their leverage limits.

The Senate failed to act on the bill, however.

U.S. Sen. John Kerry, D-Mass., sought to add provisions that would increase the maximum 7(a) loan size from $2 million to $3 million, and reduce variable interest rates charged on 7(a) loans. “I’m disappointed that we couldn’t reach an agreement in time to pass the measure and provide true help to our nation’s entrepreneurs,” Kerry said.

Kerry, who chairs the Senate Small Business and Entrepreneurship Committee, also introduced his own bill, which would temporarily eliminate fees charged to 7(a) borrowers and lenders, as well as suspend lender and servicing fees on 504 loans. The Bush administration’s decision to stop asking Congress to subsidize 7(a) loans has resulted in higher fees on the loans and made them unattractive to many borrowers and lenders, he said. On Oct. 1, the SBA increased the lender fee on 7(a) loans by nearly 12 percent, which “has exacerbated the situation,” Kerry said.

“The economic crisis has caused SBA lenders to tighten credit, making loans more expensive and harder to get for those who need them the most,” he said.

— Kent Hoover, ACBJ Wire Service