WASHINGTON, D.C. — Sen. John Kerry, Chairman of the Committee on Small Business and Entrepreneurship, is calling for help to deal with the nation’s lending crisis after more news this week showed small firms are having trouble gaining access to much-needed credit. More than 75 percent of the nation’s banks said they had tightened their lending standards for loans to small businesses over the past three months, according to the Fed’s most recent Senior Loan Officer Opinion Survey released Monday. That’s up from roughly 65 percent in the previous report.

When banks aren't loaning to small firms the Small Business Administration (SBA) should fill the gap through their 7(a) and 504 loan programs, which are the largest sources of long-term financing for America's small businesses. In 2007, over 824,000 jobs were created or retained because of these programs, but these programs are down dramatically in 2008 because high lending fees and cost of funds are putting additional stress on borrowers and lenders already weathering tough economic times. Lending through the 7(a) and 504 programs is down 55 percent and 36 percent, respectfully, since this time last year. The Administration has done little to reverse this trend.

“The rescue package was a good first step, but small firms can’t wait months for help to reach them,” said Kerry. “Entrepreneurs need help now and they’re clearly not getting it from private lenders.”

On top of introducing legislation to temporarily eliminate the fees on 7(a) and 504 loans, Kerry has repeatedly urged the Administration to act. Most recently, on Monday he sent a letter to the SBA’s Acting Administrator Sandy Baruah outlining steps the SBA can take now to relieve credit pressure. He wrote to President Bush earlier this month encouraging him to step up on behalf of Main Street’s small businesses.

“There are clear steps that can be taken today to help small firms keep their doors open as private banks shut them out,” said Kerry. “Because SBA loans are a vital source of financing for small firms when the economy is in a downturn, the Administration needs to immediately step in by reducing or eliminating the fees and changing outdated procedures that are paralyzing these programs.”

To read the Fed’s quarterly loan officer survey in full please click here.
To read the letter sent to Acting Administrator Baruah please click here.
To read the letter sent to President Bush please click here.