Republicans Trying to Stop SBA Direct Lending Plan

With the support of credit union and banking trade groups, Republicans on both sides of Capitol Hill are trying to prevent the Small Business Administration from making direct loans to businesses.

Sen. Tim Scott, (R-S.C.) this week introduced legislation that would prohibit the SBA from bypassing credit unions and banks and make loans directly. Senate Banking Committee ranking Republican Sen. Pat Toomey of Pennsylvania is a cosponsor of the bill.

“Forcing community banks and local credit unions to compete with a massive government agency is inefficient and wrong,” Scott said. “Funneling tax dollars through the federal government in order to loan it back to small business owners with interest makes no sense.”

The Biden Administration’s “Build Back Better” plan called for a $4.5 billion SBA loan program. The intention was to fill gaps in lending markets to ensure that underrepresented entrepreneurs have access to capital. When the House passed its version of the legislation, the funding was decreased to $2 billion.

Senate negotiations are continuing among Democratic senators in an effort to find the votes to pass their version of the “Build Back Better” plan. Democratic leaders hope to pass the legislation before heading home for Christmas, but that schedule could slip into next year.

House Small Business Committee ranking Republican Rep. Blaine Luetkemeyer of Missouri already has introduced a House bill to prohibit SBA direct lending. This week, Luetkemeyer went a step further and asked the SBA Inspector General about past problems with agency direct loan programs.

“Given recent proposals to expand SBA’s direct lending ability within the 7(a) Loan Program, I request your opinion on how the SBA has performed these tasks as a direct government lender in the past,” Luetkemeyer wrote, in a letter to Inspector General Hannibal “Mike” Ware.

The Independent Community Bankers of America and the American Bankers Association are supporting prohibition legislation, as are credit union trade groups.

“The current public-private partnership between lenders and the SBA benefits everyone involved, helping foster important relationships between businesses and their community,” Jim Nussle, president/CEO of the Credit Union National Association, said. “Turning the SBA into a direct lender would negatively affect these relationships and disrupt the current system at a time when small businesses need access to capital more than ever.”

Officials from the National Association of Federally-Insured Credit Unions also have endorsed the prohibition bill.

“We wholeheartedly support the need to give small businesses access to capital, and we believe other, more sustainable, ways to address this challenge exist, including reinforcing the way lenders give out small-dollar loans,” said Greg Mesack, NAFCU’s senior vice president of government affairs.

Related:

GOP Senators: SBA Shouldn’t Make Direct Loans; IG Alleges Waste

Berger: SBA Direct Loan Proposal Could Discourage CU Lending

Financial Trades to Congress: Don’t Let SBA Make Direct Loans

Spread the word. Share this post!