WASHINGTON – The United States Senate Committee on Small Business and Entrepreneurship today held a hearing to explore how the small business provisions of the American Recovery and Reinvestment Act are being implemented and to find alternative sources of financing for small business owners. The Committee heard from Small Business Administration (SBA) Administrator Karen G. Mills and from the President of American Express’s OPEN program, the company’s division that handles small business, a community development credit union, a microlender and a company specializing in capital for high-growth firms.
“The SBA has certainly taken some positive steps toward making SBA loans more affordable and accessible for small businesses, like temporarily eliminating fees on 7(a) and 504 loans and increasing the government guarantee on SBA loans to 90 percent,” said Small Business Committee Chair Mary Landrieu, D-La. “At the same time, I continue to be concerned about the plight of American small businesses. Many provisions of the Recovery Act are still awaiting implementation, and it is essential that the Administration acts fast to get capital flowing again to small businesses looking to survive and grow. While only five percent of small businesses recently reported that they use SBA financing, the agency makes up the largest single source of long-term capital in this country. We must find ways to get more SBA financing in the hands of small businesses and focus on making sure alternative sources of financing are available to America’s entrepreneurs on fair terms.”
“As we chart a course out of our economic morass, it is clear that our nation’s small businesses, which create two thirds of all new jobs annually, hold the key to spurring our economic recovery,” said Ranking Member Snowe. “Today’s hearing reinforced this belief, as we heard from several creative entrepreneurs with innovative solutions for providing alternative sources of credit to finance small businesses. Additionally, we have seen first-hand that timely implementation of stimulus provisions can have an immediate effect on stemming our small business credit crisis, and I look forward to Administrator Mills and the Administration implementing the remaining measures in short order.”
During the second panel of today’s hearing, Sen. Landrieu noted that credit cards are playing an increasing role in small business financing. According to a recent survey by the National Small Business Association, 59 percent of the nation’s small businesses utilize credit cards for their firms. The National Federation of Independent Business estimates that the number of small businesses using credit cards could be as high as 85 percent.
“As banks throughout the country continue to tighten credit for small businesses, our small businesses are increasingly turning to credit cards to keep their doors open,” Sen. Landrieu said. “At the same time, credit card companies are cutting credit limits and cancelling some accounts altogether. When entrepreneurs with outstanding credit are unable to get bank loans and suffer skyrocketing interest rates on their credit cards, they run out of sources to finance their businesses and are less likely to succeed. I will continue to work with Ranking Member Snowe and the other members of this Committee to find new ways of freeing up credit for small businesses struggling to survive, including Senate Amendment 1079 that I filed to the Credit Card bill that is moving through the Senate this week. Protections from abusive practices should apply to small businesses as well as individual consumers.”
Sen. Landrieu's opening statement, witness testimony and a video of the hearing is available here.