WASHINGTON — In a letter to President Bush today, Sen. John Kerry, Chairman of the Senate Committee on Small Business and Entrepreneurship, pleaded for action to help save America’s entrepreneurs. With private banks shutting their doors to struggling business owners, many are turning to the Small Business Administration (SBA) for help, but they’re finding little assistance.
“Since last November, I’ve urged this Administration to prepare for the looming credit crunch,” said Kerry. “In letters and hearings, members of the Committee asked the SBA to step up to help small businesses. Despite the extraordinary financial crisis, the agency has been of little help to the very people they’re meant to serve.”
Kerry introduced the Small Business Lending Market Stabilization Act of 2008 in September, which temporarily suspends fees for government loans, and Senator Obama has proposed a similar measure. Kerry has also held two hearings on the credit crisis and sent a previous letter to the SBA urging them to work in a bipartisan manner to help solve the crisis. The SBA has ignored Kerry’s repeated warnings and calls for action.
Kerry’s letter comes as new data shows that lending for the SBA’s largest loan program – the 7(a) lending program, which is the nation’s largest source of long-term small business capital – has fallen by nearly 50 percent compared with the same period last year. The SBA’s fees for these loan programs, along with banks’ rising cost of funds, have made SBA loans out of reach for many entrepreneurs. Small business owners are having an increasingly difficult time maintaining their businesses as other sources of credit, like credit cards and home equity loans, are drying up as well.
In addition to temporarily reducing fees, the Administration could make disaster loans available nationwide to serve as bridge loans until the rescue package takes effect. A similar approach was used after 9-11 and proved to be helpful. Further changes to help stabilize lending in the 7(a) program, such as: allowing weighted average coupons to sell SBA loans on the secondary market; adopting a different rate index to get the best rate for borrowers and to make the program compatible with other rate standards; and temporarily adjusting the rate cap for the loans, which will make the 7(a) program more efficient and cost-effective and restart the flow of capital to small businesses. Congress is pushing for such changes, but the SBA has the immediate authority to revise the program.
“The Administration should take immediate action to jumpstart small business lending. Waiting for a larger bailout of banks isn’t an option for many firms in desperate need of capital,” said Kerry. “My hope is that the President will see the urgency of this matter to push the SBA to work with us to save hundreds of businesses and thousands of jobs.”
To read the letter sent to President Bush please click here.