4:35 PM EDT

Nydia M. Velázquez, D-NY 12th

Ms. VELAZQUEZ. Mr. Chairman, I yield myself as much time as I may consume.

Small businesses are this country's economic drivers, yet they continually face challenges that make it hard for them to succeed in today's marketplace. Entrepreneurs are already dealing with rising energy and health care costs as well as the increasing regulatory burden. The last thing they need is for accessing affordable capital to be another barrier in the way of their success.

What we continue to see is a steady increase in costs and a decrease in access for the very programs that are intended to help entrepreneurs. Over the [Page: H4109]

past 2 years, for the 7(a) program alone, costs have doubled for smaller loans, and the average loan size has declined by 37 percent.

A recent study released by the National Small Business Association found that access to capital is the number two concern for entrepreneurs. This means that it is more of a concern than taxes and even the regulatory burden.

The Small Business Lending Improvements Act of 2007 is a bipartisan effort introduced by Ms. Bean and Mr. Chabot. This bill will make loans more economical, while providing long-term stability for small business owners.

H.R. 1332 touches all aspects of the SBA lending initiative, including the 504 program.

Not only will this legislation put affordable financing back into the hands of entrepreneurs, but will also accomplish a number of important public policy initiatives. H.R. 1332 provides incentives for medical professionals to locate in low income areas, establishes a rural lender program, and allows for veterans to secure funds to start or expand their firms.

With the number of veterans returning from Iraq and Afghanistan, the need for affordable financing is more important than ever. When Congress passed the GI bill, we made a commitment to education and homeownership for veterans. Today we have an opportunity to show our commitment to their entrepreneurial endeavors.

Small businesses must have the ability to continue spurring economic growth and creating jobs. For these reasons, H.R. 1332 has the support of American Community Bankers, Independent Community Bankers of America, American Veterans, Credit Union National Association, National Small Business Association, Veterans of Foreign Wars, American Bankers Association, the U.S. Women's Chamber of Commerce, the U.S. Hispanic Chamber of Commerce and the American Dental Association.

I strongly urge my colleagues to vote for the Small Business Lending Improvements Act of 2007.

Mr. Chairman, I reserve the balance of my time.

4:35 PM EDT

Nydia M. Velázquez, D-NY 12th

Ms. VELAZQUEZ. Mr. Chairman, I yield myself as much time as I may consume.

Small businesses are this country's economic drivers, yet they continually face challenges that make it hard for them to succeed in today's marketplace. Entrepreneurs are already dealing with rising energy and health care costs as well as the increasing regulatory burden. The last thing they need is for accessing affordable capital to be another barrier in the way of their success.

What we continue to see is a steady increase in costs and a decrease in access for the very programs that are intended to help entrepreneurs. Over the [Page: H4109]

past 2 years, for the 7(a) program alone, costs have doubled for smaller loans, and the average loan size has declined by 37 percent.

A recent study released by the National Small Business Association found that access to capital is the number two concern for entrepreneurs. This means that it is more of a concern than taxes and even the regulatory burden.

The Small Business Lending Improvements Act of 2007 is a bipartisan effort introduced by Ms. Bean and Mr. Chabot. This bill will make loans more economical, while providing long-term stability for small business owners.

H.R. 1332 touches all aspects of the SBA lending initiative, including the 504 program.

Not only will this legislation put affordable financing back into the hands of entrepreneurs, but will also accomplish a number of important public policy initiatives. H.R. 1332 provides incentives for medical professionals to locate in low income areas, establishes a rural lender program, and allows for veterans to secure funds to start or expand their firms.

With the number of veterans returning from Iraq and Afghanistan, the need for affordable financing is more important than ever. When Congress passed the GI bill, we made a commitment to education and homeownership for veterans. Today we have an opportunity to show our commitment to their entrepreneurial endeavors.

Small businesses must have the ability to continue spurring economic growth and creating jobs. For these reasons, H.R. 1332 has the support of American Community Bankers, Independent Community Bankers of America, American Veterans, Credit Union National Association, National Small Business Association, Veterans of Foreign Wars, American Bankers Association, the U.S. Women's Chamber of Commerce, the U.S. Hispanic Chamber of Commerce and the American Dental Association.

I strongly urge my colleagues to vote for the Small Business Lending Improvements Act of 2007.

Mr. Chairman, I reserve the balance of my time.

4:38 PM EDT

Steven Chabot, R-OH 1st

Mr. CHABOT. Mr. Chairman, I yield myself such time as I might consume.

Mr. Chairman, today, Madam Chairwoman and I rise to support H.R. 1332, the Small Business Lending Improvements Act of 2007. I want to especially thank the chairwoman and the gentlelady, Congresswoman Bean, for working in a cooperative and bipartisan manner to bring this bill before the House, and I want to commend them for again working with us on this.

The Small Business Lending Improvements Act amends the Small Business Act to make necessary improvements and technical changes to the primary lending program offered by the Small Business Administration, the SBA, the 7(a) guaranteed loan program. H.R. 1332 also amends title V of the Small Business Investment Act of 1958 to make significant and necessary changes to the loan program, sometimes called the 504 loan program.

Before addressing the particulars of the legislation, it is important to note what H.R. 1332 does not do. The legislation does not modify the subsidy rate for the 7(a) guaranteed lending program. The subsidy rate for the program currently is zero. After this bill is enacted, the subsidy rate for the 7(a) lending program will be zero. In fact, if this bill attempted to modify the subsidy rate, it could not because it would require an appropriation. And of course, as an authorizing committee, we

are unable to appropriate. So any argument that this bill will cost hundreds of millions or even billions of dollars over 10 years or so is just plain wrong.

At the correct time, I will oppose adding a subsidy for a program that works just fine without one.

And now, I turn my attention to what this bill does. The SBA charges a fee to borrowers which can be viewed as akin to paying points on a mortgage, which many people are familiar with doing. In addition, banks pay an ongoing fee each year on the amount of unpaid balance of the loan as guaranteed. Although some confusion exists about this point, I read the Small Business Act as authorizing the SBA to adjust the up front fee or points paid by borrowers in the same way that the SBA has the unquestioned

authority to reduce fees to lenders. Despite the authority that the SBA has, the agency has not in recent memory reduced, except when dictated by Congress, the up front fees paid by borrowers. The SBA, on the other hand, has modified the annual fee paid by the lender. The SBA even testified at a committee hearing recently that it would be reducing the fees paid by lenders.

Section 101 does two very important things. First, it clarifies that the SBA has the authority to reduce or increase the fees paid by the borrower. This should resolve any confusion as to whether the SBA has the power to reduce the points or up front borrowing fee, as well as the annual fee paid by the lender. And as already noted, section 101 requires that these fees be calculated to arrive at a zero subsidy. That is so that the fees will cover the cost of the 7(a) loan program, without an appropriation,

as I just mentioned. The section then goes on to restrict the administrator's discretion in only one regard; if an appropriation is made to support the 7(a) loan program, section 101 directs the administrator to first utilize the funds to reduce fees to borrowers and not lenders.

I support this change because the Small Business Act is, first and foremost, legislation designed to assist small businesses, not to assist small banks or any other banks. Therefore, the bill takes the logical step of directing that, should funds be made available, the administrator should reduce the fees to small businesses, not to banks.

Section 101 also requires that the administrator update quarterly the reduction in fees given available funding remaining. That makes sense, because if the SBA did not make that calculation, they would not know how much to reduce fees in an upcoming quarter, if at all. The need for this calculation simply recognizes that loan demand is not constant throughout the year and ensures that administrator properly allocates available funds. Once funds are exhausted, the legislation simply directs the

administrator to operate the program at zero subsidy, the up front annual fees needed to cover the cost of the 7(a) loan program as if there was no appropriation.

Finally, to the extent that loan demand is not high, and there are sufficient funds available, the administrator may use any available extra funds to reduce the annual fee paid by banks. Although this is a possibility, the greater probability is that all funds will be utilized to reduce cost to small business owners.

There is more to H.R. 1332 than providing the administrator with a mechanism to reduce fees under the 7(a) loan program, if an appropriation is available. The guaranteed loan program is the largest of the SBA's financing programs, reaching the greatest number of businesses, yet there are businesses whose access to this program remains limited.

The SBA loan program is a fairly complex operation, and many banks, particularly community banks, do not have a sufficient loan volume to justify the expenses associated with a 7(a) loan program. This is particularly true for independent and community banks located in rural areas.

The bill requires the SBA to establish a low-document, or LowDoc, loan program for banks located in rural areas. To the extent that a rural community has no bank willing to participate in the program, there is nothing in the Small Business Act or the bill that prohibits a small business from using a rural lender not in the immediate vicinity.

Title I also makes the Community Express Loan Program permanent. I support this because I believe it can provide the same assistance to low income communities, including those in my district in Cincinnati, which would otherwise be provided under a more costly micro loan program.

In addition to providing greater assistance in rural communities and low income communities, the bill also reduces the cost of the 7(a) loans to veterans. In addition, the bill also provides for a reduction in fees to medical practitioners seeking to establish or expand practices in areas deficient of such practitioners. These are noble goals and deserve the support of all Members of the House.

Although title I is a significant achievement, I am particularly pleased [Page: H4110]

with title II of this bill. It modifies and strengthens the loan program operator pursuant to title V of the Small Business Investment Act of 1958.

Certified development companies, or CDCs, are vital to long-term economic and community development in many districts, including mine, around the country. CDCs operate to provide long-term, fixed rate financing for small business concerns who find their financing needs cannot be met due to the loan limits of the 7(a) loan program.

[Time: 16:45]

And unlike many 7(a) lenders, CDCs must be locally based so they have a keen understanding of the needs of the communities they serve.

The first thing that title II does is change the name of the program. While this may sound minor, it is actually important. Colloquially, the program is known as the ``504 loan'' program for section 504 of title V of the Small Business Investment Act. This section authorizes the administrator to sell the loans made by the CDCs in a secondary market. It is not at all descriptive of the program or the entities involved in the program. By accurately describing the program, it will provide greater

recognition to CDCs and enable them to better promote their important mission.

Section 202 makes important technical changes to the definitions in the CDC program, including, most importantly, defining the term ``certified development company.'' As a corollary, title II eliminates the outdated term ``qualified State and local development company'' from the Small Business Investment Act of 1958.

In my estimation section 203 is the most important provision in the bill. It statutorily establishes the procedures by which the SBA designates entities as CDCs. The most important requirement of these statutory procedures is the mandate that the CDC have local board members familiar with the economic development needs of their communities. Even though the bill authorizes expansion only into neighboring States, the CDC must have representatives that understand the local economic development needs

of the new State of operation.

Another very important aspect of the bill authorizes CDCs to perform their own liquidations. Data that I have seen shows that current loan liquidation returns are about 20 cents on the dollar. Think of that. Only 20 cents on the dollar liquidation rate. That is very inadequate. By having CDCs with their local expertise perform liquidations, the government should get a better return when a loan goes bad, and that should save the taxpayers money.

Title II also makes other changes that will benefit greater financial opportunities to small businesses under the CDC program. Together all these changes made will ensure a robust CDC program that will spur economic development.

For these reasons I ask my colleagues to support passage of this important bill.

Mr. Chairman, I reserve the balance of my time.

4:48 PM EDT

Melissa Bean, D-IL 8th

Ms. BEAN. Mr. Chairman, the Small Business Lending Improvements Act of 2007, which I introduced earlier this year, was recently reported out of the Committee on Small Business, without objection, and I am pleased that it is being given consideration on the House floor today.

I would like to begin by thanking Chairwoman Velazquez and Ranking Member Chabot for cosponsoring this legislation and for their leadership in moving this bill forward. The expedited consideration of this bill, as well as the bipartisan support it has received, underscores the importance of ensuring access to capital to our small business community.

I am also very appreciative of the expert assistance provided by the House Small Business Committee staff, especially Michael Day, whose work on this issue has been invaluable.

Having been a small business owner myself, I can appreciate the challenges that entrepreneurs and small business owners face in gaining access to the capital that they need to grow. That is why I have long been active in my support of measures to improve and expand the SBA loan programs, which offer low-interest, long-term loans, not subsidies, to business owners seeking affordable options.

This bill is no exception. H.R. 1332 makes much-needed changes to SBA's lending initiatives and, most importantly, helps to preserve the original intent of these programs, to help make available affordable sources of financing. This is of particular importance as the cost of capital through these programs has risen rapidly over the last few years, stifling plans for both new businesses and those ready for plant and equipment expansion. This bill helps to reverse this discouraging trend by supporting

our entrepreneurs and not stifling their visions for growth.

In addition, H.R. 1332 addresses the need for lending in our rural communities by restoring the LowDoc program and by strengthening the 504 initiative, which is integral in stimulating economic growth in rural America.

Together, these initiatives will streamline and reduce the fees for SBA's lending programs, making it easier for small lenders to participate. Local economies throughout the country will benefit from new jobs and economic development that will occur in their communities as a result.

Again, I commend the work of the Small Business Committee, under the leadership of Chairwoman Velazquez, for recognizing the need for this legislation and prioritizing it relative to other committee work. Small businesses are the backbone of our Nation's economic stimulus, driving 80 percent of domestic job growth, and their success is dependent upon their ability to grow and to expand. This legislation helps provide them with the fundamental tools they need to do so.

I urge your support of this bill.

4:51 PM EDT

Nydia M. Velázquez, D-NY 12th

Ms. VELAZQUEZ. Mr. Chairman, I thank the gentlelady for yielding.

I know that the gentlelady has worked tirelessly to ensure that certain independently owned and operated franchises are afforded access to the SBA's 7(a) loan program. You have my assurance that I will work to address this concern as the bill moves forward.

4:52 PM EDT

Mary Fallin, R-OK 5th

Ms. FALLIN. Thank you.

Mr. Chairman, reclaiming my time, it is my goal to address the issue of certain franchisees, who by all intents and purposes are small businesses, not being allowed to receive 7(a) loans due to their affiliation with larger franchisors.

I believe the Small Business Lending Improvements Act should eventually contain language to modify the SBA's affiliation standard to allow that a business, if it is affiliated with another business and therefore determined to be something other than small, to still be eligible for a loan if it has no financial recourse to its affiliates for repayment of any of its debt.

These businesses operate financially independent of their franchisor and therefore operate like all other small businesses, and I believe they should be offered the same opportunity to receive the 7(a) loans as any other small business.

I ask that the gentlelady work with me to address this issue in the underlying legislation.

4:56 PM EDT

Heath Shuler, D-NC 11th

Mr. SHULER. Mr. Chairman, I thank the gentlewoman for yielding.

Mr. Chairman, I rise today in support of H.R. 1332, the Small Business Lending Improvements Act of 2007.

As an entrepreneur, I understand the difficulties that small business owners face on a daily basis. I also know that small businesses are the backbone of our economy, both nationally and in western North Carolina.

Small businesses account for over half of all of our jobs in the U.S. and are responsible for 60 to 80 percent of all of our new jobs. For our small businesses to continue to grow and prosper, we must help them gain access to capital.

The bill will grant American entrepreneurs that access to capital by updating and streamlining SBA's 7(a) and 504 loan programs. Additionally, this bill will eliminate loan fees for veterans returning from Iraq and Afghanistan.

As a member of the Small Business Committee, I urge all Members to support this important legislation.

5:03 PM EDT

Steven Chabot, R-OH 1st

Mr. CHABOT. Mr. Chairman, I yield myself such time as I may consume.

I want to again thank the chairwoman for her leadership on this particular piece of legislation, which I think is very good for small businesses across the country.

Mr. Chairman, as was mentioned in the Rules Committee yesterday I believe by Mr. Dreier, it's preferable for small businesses to get their loans through the private sector if they're able to do so. And as one who believes in less government as opposed to more government, that would certainly be my preference. But there are some cases in which the private sector at this point just wouldn't cover those particular entities, some of the start-up small businesses, especially some in struggling

areas, some disadvantaged areas as we have in some urban areas, and some rural areas as well. And so there is an appropriate place for 7(a) loans and the 504 loans. As I mentioned, the name of that particular program is going to be changed as a result of this bill.

I think these are vital improvements. A streamlining of the process will be helpful to small businesses all across the country. I think we have a responsibility to improve the climate for small businesses, especially when one considers that somewhere between 60 and 80 percent of the new jobs that are created in this country are created not by large corporations, but by small businesses. So I think this bill helps businesses who need it most. I think this is a good bill, and so I urge my colleagues

to support it.

Mr. Chairman, I yield back the balance of my time.

5:04 PM EDT

Nydia M. Velázquez, D-NY 12th

Ms. VELAZQUEZ. Mr. Chairman, I yield myself as much time as I may consume.

Mr. Chairman, this week is Small Business Week, a time to honor entrepreneurs for the contributions they make to this country. Small businesses create three out of every four new jobs. They are the economic backbone, and our largest job creators.

However, it is not easy to be a small business owner. They struggle every day to provide health care for their employees, to comply with increasing regulatory burdens, and to access financing to keep their businesses up and running.

This week, rather than just talk about supporting our Nation's 26 million small businesses, we have an opportunity to do something, provide them with the support they deserve, and ensure it is not a struggle to access much needed capital.

H.R. 1332 will make loans more economical while providing long-term stability for small business owners. Ensuring loans are affordable and that relief from rising capital costs is available is critical for small firms to remain a driving force in today's economy. Let's put the money back into the hands of entrepreneurs where it belongs.

I want to thank the ranking member, Mr. Chabot, for his work and his leadership in working with me on this legislation. I also want to thank the staff that worked on this bill; from the minority staff, Mike Smullen, Barry Pineles and Kevin Fitzpatrick; and from the majority staff, Michael Day, Adam Minehardt, Andy Jiminez and Tim Slattery, and Elizabeth Hart and Sam Hodas from Representative Bean's staff.

I strongly urge my colleagues to vote for the Small Business Lending Improvements Act of 2007.