WASHINGTON – Senator Mary L. Landrieu, D-La., Chair of the U.S. Senate Committee on Small Business and Entrepreneurship, today held a roundtable titled, “Helping Small Businesses Weather Economic Challenges and Natural Disasters: A Review of Legislative Proposals on Access to Capital and Disaster Recovery.”
The discussion focused on legislative proposals currently before the committee including: S. 415, the Small Business Disaster Reform Act; S. 511, the Expanding Access to Capital for Entrepreneurial Leaders (EXCEL) Act; S. 289, the Commercial Real Estate and Economic Development (CREED) Act; and the Communicating Lender Economic Activity Records from the Small Business Administration (CLEAR SBA) Act.
Click here to watch a video of the roundtable.
Sen. Landrieu introduced S. 415 along with Sens. Cochran, R-Miss., Kirsten Gillibrand, D-N.Y., Roger Wicker, R-Miss., and Mark Pryor, D-Ark. This bill includes two no-cost disaster reforms that have enjoyed broad bipartisan support in the past.
“As Chair of this Committee, and as a Senator from a state repeatedly hit hard from natural disasters, I believe that one of the most important responsibilities of this Committee is to ensure SBA is fully staffed, better organized, and ready to quickly assist businesses post disaster,” Sen. Landrieu said. “After Hurricanes Katrina and Rita, the SBA response was slow and inefficient and insufficient to the task at hand. While there has been improvement at SBA, I continue to hear from small businesses that additional reforms are needed to make these programs more responsive to the needs of impacted businesses.
“Our small businesses are the economic heartbeat of these communities, and they deserve to get the fastest and best help possible, particularly businesses that take the risk of being the first to open back up, before they even know if anybody else is coming back.”
First, S.415 modifies the SBA requirement that borrowers must use their personal home as collateral for business disaster loans less than $200,000. The bill requires SBA to use business assets, such as commercial real estate, equipment, or inventory, before requiring a primary residence be used as collateral towards the loan.
A similar provision passed the House of Representatives twice in 2009: on October 29, 2009 by a vote of 389-32 and again by voice vote on November 6, 2009. The provision included in S. 415 passed the Senate 62-32 on December 28, 2012 as part of the Hurricane Sandy Supplemental.
Next, the bill also authorizes the SBA Administrator to allow out-of-state Small Business Development Centers (SBDCs) to provide assistance to small businesses located in Presidentially-declared disaster areas. This allows SBDCs to share resources across state lines or other boundaries following disasters, similar to how private sector utility companies share linemen.
This provision has passed the Small Business and Entrepreneurship Committee unanimously three times (during the 109th, 110th, and 111th Congresses); passed the Senate by unanimous consent (110th Congress); and received 57 bipartisan votes as part of the Success Ultimately Comes from Capital, Contracting, Education, Strategic Partnerships and Smart Regulation (SUCCESS) Act of 2012 amendment offered by Sen. Landrieu last Congress.
Access to Capital
Last year, the committee held three roundtables to explore the condition of the ecosystem for entrepreneurship. During these roundtables, the committee heard from 41 experts who made more than 60 recommendations on how the federal government could help small businesses grow and how entrepreneurs and start-up companies could be better supported.
These recommendations led to key pieces of legislation to increase access to capital for small businesses. One bill was the EXCEL Act that was introduced last year by Sen. Landrieu and then-Ranking Member Olympia Snowe, R-Maine.
The Excel Act would modify the Small Business Investment Company (SBIC) program to raise the amount of SBIC debt the SBA can guarantee from $3 billion to $4 billion. It would also increase from $225 million to $350 million the amount of SBA guaranteed debt a team of SBIC fund managers who operate several funds can borrow.
Under the SBIC program, the SBA licenses, regulates and helps provide funds for privately owned and operated venture capital investment firms. SBICs are licensed and regulated by the SBA. SBICs use their own private money, plus money borrowed with an SBA guarantee. Typically, an SBIC will borrow $2 of SBA guaranteed funds for every $1 of private capital.
Since 1958, SBICs have invested $56 billion to over 100,000 small businesses. SBIC’s have funded Apple, Fed-Ex, Callaway Golf, Jenny Craig, and Outback Steakhouse.
Another key piece of legislation is the Commercial Real Estate and Economic Development (CREED) Act, which would extend for five years a provision allowing small business owners to use SBA 504 loans to refinance certain existing commercial mortgages.
The provision, originally enacted as part of the Small Business Jobs Act of 2010, did not become fully operational until February 2012, significantly shortening the period of time that businesses could use 504 loans to refinance qualifying existing debt. It expired on September 27, 2012.
The 504 loan program is a long-term financing tool for economic development that provides small businesses with long-term, fixed-rate loans to help them acquire major fixed assets for expansion or modernization. Certified Development Companies (CDC) work with the SBA and private sector lenders to provide financing to small businesses under the 504 loan program. A CDC is typically a private, nonprofit corporation set up to contribute to the economic development of its community.
In Fiscal Year 2012, the program’s second and final year, the SBA approved more than 2,400 refinancings for over $2.2 billion to small businesses.
The CLEAR SBA Act requires the SBA to post specific information on its website to make searching for and obtaining an SBA loan easier. Potential borrowers would be able to see which banks are providing SBA loans, and with this information, be better able to choose which banks to approach about an SBA loan.
“When I talk to small business owners in Louisiana and across the country, one of the things I hear most is that access to capital is still a significant challenge,” Sen. Landrieu said. “The common-sense proposals we discussed in today’s roundtable provide great opportunities to help small businesses by strengthening these successful programs. I urge my colleagues in Congress to move forward on passing them as quickly as possible.”