WASHINGTON – United State Senate Committee on Small Business and Entrepreneurship Chair Mary Landrieu, D-La., and Ranking Member Olympia J. Snowe, R-Maine, last night spoke on the floor of the Senate about the key small business provisions included in the Economic Recovery Package.
The bill includes provisions to increase access to capital for small firms. It temporarily eliminates fees on the Small Business Administration’s flagship loan programs – 7(a) and 504 loans – which could stimulate as much as $20 billion in new lending.
The bill also includes key assistance to microbusinesses, funding for the SBA’s surety bond program, which will help the agency guarantee bonds for small contractors who have been squeezed out of the conventional bonding markets, and $10 million for the SBA Inspector General’s oversight of small business stimulus funds.
On the Senate floor, Sens. Landrieu and Snowe also emphasized the need to elevate the SBA Administrator to Cabinet-level status so that the Administrator can better advocate for the needs of small businesses. Last week, the Senators sent a letter to President Barack Obama requesting the move. The full text of the letter is attached.
A full transcript of Sens. Landrieu’s and Snowe’s colloquy is below:
Ms. LANDRIEU. First, let me thank the Senator for her leadership over the years as a chair and ranking member of this important committee. Let me also acknowledge the great leadership in recent years of Senator John Kerry, the chairman of the Small Business Committee. Particularly in regards to this particular bill, working out some bipartisan provisions that we could include, I wish to thank Senator Durbin and his staff who worked closely with us.
I wish to begin my brief colloquy with a statement that might be surprising to some who are listening, that 40 percent of all the capital in the country for small business, basically, comes through or touches the Small Business Administration. That is how important this small department of only 2,000—it used to have 3,000 people—it was terribly, and unjustifiably, in my view, cut under the previous administration. I wish to acknowledge that Senator Snowe has been a fierce and effective advocate. In the case of those cuts, she argued, sometimes successfully and sometimes not, those cuts shouldn’t take place. Nonetheless, the Presiding Officer has started a small business that turned into a large business, and he knows that one of the great challenges right now is access to capital and affordable capital. We are not talking about access to being able to use a credit card at 21 percent or 15 percent. That is not affordable capital. We are not talking about mortgaging your house only to watch the value fall by 50 percent. We are talking about things that could really spur the flowing of the capital markets in this country.
Briefly, in the underlying bill we voted cloture on, we have eliminated the fees associated with the 504 economic development program, the 7(a) program, and the 504 program.
Lending is down by 40 to 60 percent, depending on the State. In Louisiana, we are down 60 percent. We think by eliminating these fees, it may spur banks to lend money and borrowers to come forward for this access to capital.
For over 50 years, the SBA’s lending programs provided critical financing to small business owners who could not get affordable loans in the conventional market. In the wake of the financial crisis and this recession/depression, the SBA loan programs have not filled the void left by increasingly tight markets for conventional bank loans. We hope some of the provisions in this bill will help reduce that trend.
The fee waivers supported by the U.S. Chamber of Commerce and other business groups are very encouraging by the results when we did this the last time, after the 9/11 attacks—what that might mean to spur economic growth in this country in the next few months and years to come.
Let me also mention that in the underlying bill, we specifically targeted microloans. This might also be surprising to many, but the microloan program provides very small loans—on average about $13,000 per loan. That seems to be very small, but sometimes I think we get caught up in billions and billions and we forget that sometimes $5,000, or $10,000, or $20,000 is all it takes to get a good idea off the ground and to help create jobs in America.
I want to say, since so many Government programs get a bad rap and a black eye, this program—in large measure, my colleague from Maine helped to start it in 1992—the microloan program has been one of the most successful programs to date, having just one loss in its 18-year history, just one loss. Microloans are made to the smallest of businesses, typically home-based businesses, startups, newly established or small businesses. The program has always also been a great way to meet the needs of minority women and rural small business owners.
The final part of this bill I want to mention before turning it over to my colleague is the venture capital funds that will also stimulate the flow of venture capital to emerging small businesses by providing flexibility for participants in the SBA’s Small Business Investment Company programs, SBIC programs, which have been successful. The language in the underlying bill will give them the flexibility to even be more successful. The occupant of the chair knows, Virginia’s economy is growing and being spurred by new investment in small business. The Chair has had, as Governor of that State, a front-row seat. These are some of the things we have put in the underlying bill.
I will mention one final item. The good Senator from Maryland, Ben Cardin, secured on the floor of the Senate, in addition to the work we had done originally on this proposal, a surety bond amendment, which was passed by a pretty overwhelming vote in the Senate, which will help small businesses secure—particularly in the areas of construction—those surety bonds that will enable them to be part of this new stimulus package.
I am proud of the work we have done. Again, if it can be improved in conference, I would be open to that.
I would like to turn the final part of this presentation over to the good Senator from Maine for comments about the financing portion, as well as some other portions I spoke about.
I yield the floor.
The PRESIDING OFFICER. The Senator from Maine is recognized.
Ms. SNOWE. Mr. President, I commend my colleague, Senator LANDRIEU, from Louisiana, the new chair of the Small Business Committee. I am confident that she is going to champion small businesses and the critical role they play in our Nation’s economy. I look forward to joining forces with the Senator from Louisiana. She is going to be an effective and eloquent advocate on behalf of the men and women who make up the millions of small businesses across this country, which are the lifeblood of our Nation’s economy.
One of the things we learned during the aftermath of Hurricane Katrina is that over 85 percent of businesses in Louisiana were small businesses. Similarly, in my home state of Maine, over 97 percent of all businesses are small businesses. So we understand the imperative of doing everything we can to reinforce and leverage the resources we have at the Federal level to support the engine of our economy; and that is, of course, America’s small businesses. They are too often overlooked, Mr. President, in the role they play in our Nation’s economy and in their job creation potential—creating two-thirds of all net new jobs in America.
At a time of cataclysmic job loss, we have to look to small businesses to spur economic growth. I am concerned because I have taken many street tours across my State, and have seen first hand what we are seeing unfold all across America, small businesses closing their doors. So I know that we must do everything conceivable to reinforce, and bolster the resources of the Small Business Administration, to help it make a difference in creating jobs.
Frankly, all too often small businesses are overlooked, unrecognized, and not acknowledged for the indispensable role they play in driving our Nation’s economy. Nationally, unemployment is at 7.6 percent. In the past 4 weeks, more than 2.3 million people have filed new claims for jobless benefits. Those losses will only cascade even further if small businesses are unable to access the capital needed to help them start, grow, and expand their operations. It is one of the issues I am working on as we speak. Certainly, through the Troubled Asset Relief Program and with the respective Federal agencies, I think we should have a phone line so small businesses can call to find out how we can match up their needs for lending with banks and financial institutions across this country.
As we speak, we are finding that more and more small businesses are unable to get the lines of credit they need to continue to carry on their business. Certainly, in a multiseason State such as Maine, people cannot do some things during the course of the winter, but they want to maintain their workforce and are unable to because they cannot access the line of credit that is indispensable to survival. There are a number of things we can do at the Federal level, much of which is included in this stimulus plan pending before the Senate.
I agree with my colleague, Senator Landrieu that we must focus upon initiatives that are crucial to creating jobs. After all, when everybody talks about the stimulus plan, how to evaluate it, as I said last week, we need to create a rigorous standard by which we measure job creation in this legislation. It is absolutely essential in building the confidence that this stimulus plan will work.
The way to do that is to look at some of the provisions targeted toward the small businesses, which will play a key role in our economy. When you realize that firms with fewer than 500 employees comprise 99 percent of all businesses in America. And according to the SBA, small businesses have greater potential to recover faster than larger businesses during the course of a recession. But small businesses are fighting for survival.
That is why Senator Landrieu and I worked to ensure that key initiatives were included into this bill, which will be critical for small business success during these very difficult economic times. We collaborated on these initiatives because we know that they are paramount to securing a robust future for small businesses.
SBA lending numbers are in a free fall. That is demonstrated in several of the charts I have here. The 7(a) loan volume has dropped from over $3.2 billion to under $2 billion, respectfully, compared to the same quarter last year. In terms of percentage impact, that is a 43-percent decline. For startup 7(a) loans, the numbers are just as bad. Nationally, startup loans are down over 40 percent, when compared to the first quarter of fiscal year 2008 to the current fiscal period.
In Maine, for example, if you look at 7(a) lending, it has declined by nearly 69 percent for the first quarter of fiscal year 2007, compared to this quarter of fiscal year 2009. That is why it is absolutely urgent that we make sure the initiatives that are included in the Senate-passed version of the stimulus plan are maintained and preserved in conference. They will go a long way toward addressing and minimizing many of the problems small businesses face.
For example, Senator LANDRIEU and I worked in tandem on some of these key initiatives, which include those to reduce or eliminate fees for 504 and 7(a) loans, for instance. This is a departure from the approach taken in the House but, frankly, reducing these fees will provide a greater incentive for both small businesses and lenders to participate in the program, rather than just increasing the guarantee, which is reflected in the House-passed version of the stimulus plan.
We will also be able, through supporting these programs, to reduce the cost of SBA loans for borrowers. These SBA loans will help to create or retain 750,000 jobs.
Additionally, we have included provisions to increase funding, as Senator LANDRIEU indicated, for the SBA’s vital microloan program. These microloans are not only easy to process, they are effective and accessible to small businesses. Again, these loans have demonstrated time and again their job creation value and potential. We have improved the venture capital program and increased the size of loans that small businesses can take under the SBA’s 7(a) and 504 lending programs. Another key component is the automation of the SBA’s loan processing, which must be improved. It would be easier for lenders, particularly small ones and those in rural areas, to participate in the loan programs because, increased automation will result in increased usage of these key programs. Most critically, this automation would reduce the regulatory burden on small businesses. In fact, the SBA Office of Advocacy has determined that the cumulative annual cost of Federal regulations to small businesses is more than $1 trillion. So automation would take a step toward reducing that burden, and it would make a tremendous difference for many in my State, in Louisiana, and across the country.
As a member of the Finance Committee, I also want to highlight key tax provisions in the stimulus plan. Again, I express my gratitude to Senator LANDRIEU for her advocacy of these initiatives because they are essential. The first is an extension of Section 179 Small Business Expensing at the $250,000 level for 2009 and 2010. That has demonstrated—repeatedly in the past—to create jobs. We need to use proven programs, like this, in the stimulus that have job creation value.
I am very pleased that level of $250,000 will be extended both in 2009 and 2010 so that small businesses can make investments in plant and equipment that they can deduct immediately. In 2005, the most recent year for which data was available, according to the IRS, more than 4.5 million small businesses claimed the section 179 expense deduction.These are 4.5 million job-creating engines, which this provision could assist at this difficult time in America.
The other provision, of course, is the 5-year net operating carryback of losses which will allow companies to use these losses against prior-year profits to gain immediate tax refunds.
Thank you, Mr. President, for allowing me to speak about these key small business provisions in the stimulus bill. As we focus our attention on this stimulus package, we have to measure each and every initiative by its job-creation capabilities and as a catalyst for creating those jobs. As Senator Landrieu indicated, there is no greater catalyst for job creation in this country than small businesses. I have often stated that we have ignored and overlooked their tremendous potential.
The stimulus package, which is pending before the Senate, will bolster small businesses through a variety of initiatives. I am pleased we were able to incorporate these provisions, through the support of Senator Landrieu and many members of the Senate Finance and Appropriations Committees and particularly Senators Baucus and Grassley, Finance Committee chair and ranking member, and Senators Inouye and Cochran, Senate Appropriations Committee chair and ranking member. Thank you to all of those who realized how vital these initiatives will be to creating jobs. I hope that in the conference committee these initiatives will be preserved because at the end of the day, this package will be measured in terms of its ability to jump-start this economy. And we know that small businesses will be on the front lines of job recovery, if given the resources and the ability to do so.
Again, I thank my colleague from Louisiana for being such a critical advocate and for her leadership on the Small Business Committee. I am looking forward to working with her in the future.
Mr. President, I yield the floor.
Ms. LANDRIEU. Mr. President, if my colleague will yield for a moment, I want to mention as we close, I am so happy and excited about the President’s nominee for the Small Business Administration. I had the opportunity to meet her for the first time today.
I ask my colleague from Maine, who is actually very familiar with this nominee, and she is from Maine, if the Senator would share a word or two about the particular qualifications of this nominee as we get ready to start this process. Through the Chair to my friend from Maine, it is indicative of the President’s focus and his interest and his understanding by giving us such a quality nominee to consider.
The PRESIDING OFFICER. The Senator from Maine.
Ms. SNOWE. Mr. President, I appreciate that Senator Landrieu has raised for discussion the tremendous credentials that are offered by Karen Mills. There is no question that she has a tremendous background both in manufacturing and venture capitalism and in understanding the role that small businesses play in our Nation’s economy.
She has had firsthand experience, not only through her family’s business endeavors, but also through her work in venture capitalism in helping to shape and rebuild various businesses. She understands and appreciates the resources that are necessary and essential to rebuilding businesses and the access to capital that is required.
Also, she played a pivotal role in Maine’s economy, in encouraging the use of cluster development. She has worked extensively with the Brookings Institute on how to nurture cluster development in various small and rural communities, to help rebuild and reshape their local economies.
What we have recognized, and what she has certainly demonstrated time and again through her own personal firsthand experience, is that it does not take a lot of resources to nurture and create small businesses as a foundation for a local economy. It is that type of experience she will bring to the Small Business Administration.
In fact, I had the opportunity to meet with her this afternoon as she prepares for the confirmation hearing. There is no question that she has widespread knowledge on what it will take to rebuild the Small Business Administration helping it to be far more responsive and receptive to small businesses, to understand what they need, to link them up with lenders, to provide the technology required to make the agency much more effective and responsive to the needs of small businesses across the country.
I am looking forward to working with Ms. Mills and the chair of the Small Business Committee because I believe that Ms. Mills is outstanding in her capabilities and truly appreciates the role small businesses play in America’s economy. Mr. President, I ask unanimous consent to have a biography of Ms. Mills printed in the Record.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
BIOGRAPHY OF MS. KAREN GORDON MILLS
Ms. Karen Gordon Mills is the President of MMP Group, Inc. Previously, she was the Co-Founder and Managing Director at Solera Capital. Before founding MMP Group, she was the Managing Director and Chief Operating Officer of the Industrial Group for E.S. Jacobs and Co., from December 1983 to January 1993. In this role, Ms. Mills personally led seven leveraged buyout transactions and had an influential or board role in six others: Ms. Mills background includes consulting for McKinsey and Co. both in the U.S. and in Europe, and working as a Product Manager for General Foods. She has been a Director and Member of Audit and Compensation Committees of Arrow Electronics Inc. since 1994 and Director and Member of its Audit Committee of ArmorAll Products Inc. since 1994. Ms. Mills serves as Director of Latina Media Ventures LLC, Triangle Pacific Corp. since 1988, Annie’s Homegrown Inc., Scotts Company, and Guardian Insurance Company. Ms. Mills chairs Governor Baldacci’s Council on Competitiveness and the Economy. She also sits on the Governor’s Council for the Redevelopment of the Brunswick Naval Air Station, which recently went on the BRAC closure list, and serves on the Boards of the Maine Technology Institute and the Maine Nature Conservancy. Ms. Mills is a member of the Council on Foreign Relations and has been Vice Chairman of the Harvard Overseers. Ms. Mills has an A.B. in Economics from Radcliffe College, Magna Cum Laude. She also holds an M.B.A. from Harvard Business School where she was a Baker Scholar.
Ms. LANDRIEU. Mr. President, I thank the Senator for her testimony in regard to Karen Mills and will commit as the new chair of this committee to move her nomination through with dispatch.
I will say before I give closing remarks, a word to banks and credit unions, particularly community banks, that I am intent in a leadership position on this committee to have the SBA be a better partner to community banks and credit unions as we really leverage the power of the SBA. Too often in the past, it has been seen as a problem or too complicated or too bureaucratic. I am looking forward to making that a much smoother, more powerful, muscular partnership so that our small businesses in America can have a model, the best in the world. It is going to be exciting to work on.
I thank the Senator from Maine and look forward to having a very strong partnership with her in the months ahead.
Is there any further business?
Ms. SNOWE. Mr. President, one other issue that is critical, which Senator Landrieu and I both share, is that of elevating the Small Business Administration to Cabinet-level status. As I have said before, this will underscore the critical role that small businesses play in our economy. I know Chair Landrieu shares and supports such an initiative. It is long overdue and unquestionably should be done. We should elevate the status of the agency to give it the prominence and profile it deserves on behalf of the men and women of our Nation’s small business community. There should be far more focus upon the role that they can serve in not only our domestic marketplace, but the global marketplace as well.
I will continue to call for the elevation of this critical position. I have advocated it for years. In light of where we are today in the economy, and the increase in unemployment, it is even more imperative that we increase the prominence of small businesses in the President’s cabinet because, again, doing so will provide the attention and resources they require to survive and be prosperous.
Ms. LANDRIEU. Mr. President, I agree with the Senator from Maine. I was happy to join with her in a letter to the President urging him to take this step. Hopefully, he will consider that request and give it every consideration.