Peters Cosponsors Legislation Supporting Small Business Lending
WASHINGTON, DC – U.S. Senator Gary Peters (MI), a member of the Senate Small Business and Entrepreneurship Committee, today announced he has cosponsored bipartisan legislation supporting the U.S. Small Business Administration (SBA)’s flagship lending program, the 7(a) loan program. The Help Small Businesses Access Affordable Credit Act would authorize the SBA Administrator to increase the 7(a) program loan limit by up to 10% in a fiscal year, without legislative action. The 7(a) program has recently experienced extremely high demand and reached its loan limit before the end of the fiscal year, requiring Congress to enact “emergency” legislation to further increase the cap. In July 2015, the program lapsed for several days forcing the SBA to suspend 7(a) loans and disrupting the lending market, while Congress enacted legislation to increase the total cap.
“Small businesses are critical to Michigan’s economic recovery, and the unprecedented demand for SBA 7(a) loans is a promising sign of continued economic growth. As we work to further strengthen our economy, we must ensure the reliability of 7(a) loans to help small businesses grow,” said Senator Peters. “As a member of the Senate Small Business Committee, I’m proud to cosponsor this bipartisan legislation, which will help ensure that the 7(a) loan program can continue meeting high demand for Michigan small businesses.”
Michigan saw the largest loan volume in fiscal year 2015 than any previous year, with 2,485 7(a) loans totaling $663 million dollars to Michigan small businesses. Nationally, the 7(a) loan program has experienced unprecedented demand, with 63,000 loans totaling $23.6 billion in fiscal year 2015 - an increase of 22% in number of loans and 23% for total dollars nationwide over the previous fiscal year.
The Help Small Businesses Access Affordable Credit Act applies the “reprogramming” process to the SBA’s 7(a) loan program, in which Congress allows some agencies to adjust their funding amounts by up to 10% by reallocating funds between accounts or programs, as long as transfers are first approved by the House and Senate Appropriations Committees. According the Congressional Budget Office, this legislation has zero cost, and because the 7(a) program operates on a zero subsidy basis, increasing the loan level is deficit neutral. The bill, introduced by Senators Chris Coons (D-DE) and Jim Risch (R-ID), is supported by both the SBA and the National Association of Government Guaranteed Lenders (NAGGL).
The SBA’s 7(a) loan program helps small businesses and startups with a wide range of business development activities, including the establishment or acquisition of a business, business expansion, and the purchase of equipment, machinery, or supplies, as well as for short-term and long-term working capital. The 7(a) program’s maximum gross loan amount for any one 7(a) loan is $5 million – up to $3.75 million maximum guaranty.
Last July, Peters joined his colleagues to introduce bipartisan legislation, which was signed into law by the President, increasing the authorization level for the 7(a) loan program from $18.75 billion to $23.5 billion for fiscal year 2015 so that the loan program could continue meeting high demand. In November, Peters sent a letter to the Senate Appropriations Subcommittee on Financial Services urging an increase in the authorization level of 7(a) loans for fiscal year 2016 from an initial recommendation of $23.5 billion. In December, the authorization level for the 7(a) loan program for fiscal year 2016 was set to $26.5 billion.
