WASHINGTON – Senator John Kerry (D-Mass.), Chairman of the Committee on Small Business and Entrepreneurship, said a closed-door White House meeting with banking officials and senior members of the Administration is likely too little, too late to help entrepreneurs facing tightening economic conditions.
“This meeting is long overdue. It should have happened months ago when the Bush Administration’s own data predicted a credit crunch for small businesses,” said Kerry. “If this Administration was serious about helping small businesses, they would have held this meeting before Congress considered the economic stimulus package and they would have put the weight of the White House behind the initiatives I’ve been advocating to make loans more affordable for America’s 27 million small businesses. Now is not the time to raise fees on loans or to cut funding for critical business counseling when delinquencies are nearly double what they were last year.”
Last month, Kerry introduced a bill that provides nearly $200 million to reduce loan fees and double funding for the microloan program so entrepreneurs can access the capital they need to start and expand their businesses. It also provides incentives for banks to lend to small firms. To help businesses that are facing ballooning payments avoid financial problems, Kerry’s bill allows growing businesses in good standing to refinance existing business debt using the government-backed fixed assets loan program, known as 504, which have low-interest rates fixed for 20 years. On February 4th, the Federal Reserve released a report showing one third of U.S. banks have tightened their lending standards for small business loans. In addition, government guaranteed loans are down by as much as 23 percent compared to last year.
The small business community has been concerned about a growing credit crunch since last spring. In May at a Committee roundtable on access to capital issues, the National Small Business Association cited a survey of their members showing that as many as 1 in 5 small firms cannot access the capital they need and that 44 percent of entrepreneurs finance their businesses on high-rate credit cards, levels that they had not seen since the credit problems of the early 1990s. The trade association for the government’s largest small business loan program known as 7(a) wrote the Administration in December raising concerns about loan trends to small firms.
The Bush Administration has been ignoring data on the state of small business economic conditions since at least October. Senator Kerry has been pressing the Administration publicly since a November hearing to use all of its available resources to help ease the credit crunch on small businesses. In addition to reducing fees on loans, Kerry has challenged the Bush Administration’s budget at a hearing last month that slashes funding for small business counseling programs. According to data from the Small Business Administration (SBA), more than $1 billion in 7(a) loans were delinquent at the end of December 2007 compared to about $673 million in December 2006. As delinquencies increase, the SBA’s business counseling services will play a key role in helping thousands of small businesses avoid bankruptcy.