House Small Business Committee Chair Velazquez on Administration's Small Business Proposal

Feb 05, 2010, 17:02 ET from Chairwoman Nydia M. Velázquez (D-NY), House Committee on Small Business

WASHINGTON, Feb. 5 /PRNewswire-USNewswire/ -- Rep. Nydia M. Velazquez (D-NY), the Chairwoman of the House Committee on Small Business, commented on the Administration's Small Business Administration (SBA) proposal announced today.  Finding affordable loans has remained a persistent problem for small businesses, preventing them from growing and hiring additional employees.  According to a recent Federal Reserve Survey of loan officers, credit conditions remain constricted.  The survey, released this week, found that while only 3.7% of banks had tightened lending standards for small businesses, nearly 10.8% had cut small business credit lines, and none had increased credit lines to small firms.

In its proposal, the Administration suggests raising the size of loans made through the SBA Express program.  SBA Express has been criticized for underwriting loans that banks would have already made even without government backing and for carrying the highest default rate of any SBA program.

"With loan defaults on the rise, we should not base our strategy on increasing the size of the least stable SBA lending program," Velazquez said.  "SBA Express has acted as nothing more than a giveaway to Big Banks and expanding it will neither further economic recovery, nor create new jobs."  

The Administration's plan also called for expanding the Certified Development Company (CDC)/504 program to enable the refinancing of existing commercial real estate mortgages.  Currently, there is a requirement that projects create new jobs to qualify for 504 financing.  Expanding the initiative to refinance commercial real estate debt would fly in the face of the program's intent and make it less effective.

"The SBA's Certified Development Company initiative is intended to promote job growth and economic development," Velazquez noted.   "The refinancing of commercial real estate debt does not create jobs and, in fact, may dilute the program, drawing resources away from projects that do have job creation potential."

As an alternative, Velazquez called for other steps to improve the flow of capital to small businesses.  She observed that, in both October and last February, the House of Representatives approved legislation that would enable the SBA to fill in the gap when small business credit markets do not function correctly.  Enacting that proposal and extending elements of the Recovery Act that were signed into law last February would make credit more available and affordable for aspiring entrepreneurs and existing businesses.

"Plenty has already been done to help Big Banks, but the benefits haven't flowed through to entrepreneurs," Velazquez said.  "The House has already approved legislation that would be much more effective for promoting small business lending and investment and I look forward to working with the President to see those measures enacted."

SOURCE Chairwoman Nydia M. Velázquez (D-NY), House Committee on Small Business