WASHINGTON, D.C. — In response to the Federal Reserve’s recent data showing that obtaining affordable credit has become increasingly difficult for small businesses, Senator John Kerry (D-Mass.), Chairman of the Committee on Small Business and Entrepreneurship, called for the passage of legislation to stimulate lending to small firms by reducing loan fees, giving small businesses more opportunities to grow. The data released today by the Federal Reserve brings little hope to America’s small businesses being squeezed by the lingering credit crunch. According to the Fed’s most recent Senior Loan Officer Opinion Survey, more than 65 percent of domestic banks—up from roughly 50 percent in the previous survey—indicated that they had tightened their lending standards for loans to small businesses over the past three months.
These tighter lending standards have evidently affected the Small Business Administration’s (SBA) largest loan programs. Volume in the 7(a) program—the largest SBA loan program—is down by nearly $1 billion from this time last year, and lending in the SBA’s 504 fixed asset loan program is down by almost $600 million. But the Bush Administration has done little to reverse this trend.
“While thousands of families are being forced to abandon their homes, entrepreneurs are abandoning their businesses or their dreams of owning one,” said Sen. John Kerry, Chairman of the Committee on Small Business and Entrepreneurship. “Small businesses employ more than half our nation’s workforce and create new jobs each day. But as the credit crunch ripples through our economy, small firms are sinking and the Bush administration is watching idly from the shore.”
To help entrepreneurs, Senator Kerry has proposed an initiative to reduce fees on loans to make credit more affordable and provide an incentive for lenders to give small businesses the loans they need to survive. The proposal is part of a supplemental bill which the Senate Appropriations Committee will consider in September.
The initiative sets aside $100 million to support $7.5 billion in reduced-fee loans to small businesses. Of the $100 million, $64 million would provide reduced fees on $5.8 billion in general loans, $25 million would support $1.3 billion in loans for veterans and $11 million would support $490 million in loans for businesses purchasing energy-efficient technology.
“For every $33,000 loaned to small firms a job is created or saved, meaning food on tables and bills paid,” said Senator Kerry. “Entrepreneurs can’t rely on receiving credit from banks any longer. As the pillars of growth in our economy, they need our help now more than ever.”
To view the Fed’s quarterly loan officer survey in full please click here.