Hearing: SBA's Finance Programs

Statement

Hearing: SBA's Finance Programs

Thank you Mr. Chairman. I would also like to thank Congresswoman Millender-Mc Donald for letting me sit in on this hearing. I appreciate all of the hard work you are doing on this issue.

The President never misses an opportunity to proclaim that small businesses are a priority for this administration - yet time and time again his policies simply do not back up this rhetoric. No place is this more apparent than in how SBA's access to capital programs are being run. Ensuring loans are affordable and that relief from rising capital costs is available are both critical in helping entrepreneurs to remain a driving force in today's economy. While this administration has talked the talk - they have failed to walk the walk.

For evidence of this one only needs to look at the 7 (a) program - the largest long term lending initiative for small businesses. Under the current administration, lending has grown much more costly and harder to obtain. In the past two years alone, costs on borrowers have doubled and lender costs have risen by 118 percent - making it increasingly difficult for small businesses to receive the capital they need.

As if that was not bad enough, in the FY2007 budget, the administration plans to further increase the costs of this program by proposing to raise current fees, and creating a whole new set of fees. This will make the program even more costly - only pushing 7(a) and other lending programs further out of reach. It has become very clear what type of effect these poor policy choices are now having - lending was down by $300 million last quarter. When you factor these new costs, coupled with the rising interest rates, it is apparent that the trend of less and less capital going into the economy is only going to continue.

Traditional capital is not the only place this administration is failing our nation's entrepreneurs. For the last year and half SBIC's participating security program has been shutdown due to mismanagement and poor policy decisions. However, the agency has yet to propose a plan to reopen the program.

I think this speaks to the level of commitment that exists for this nation's small businesses. When you consider this decision in light of the fact that currently less than 1 percent of venture capital goes to minority businesses - it really makes you wonder where the administration's priorities are.

Compounding this is the proposal to abolish one of the most significant policies affecting low income entrepreneurs, the Microloan Program. It is just like this administration to put politics in front of good policy. They continue to call for an elimination of the Microloan program when they do not have the support of one single member of the House or Senate.

This program makes loans to entrepreneurs that are unable to get a traditional loan due to inexperience with credit, lack of assets, or the need for on-going technical assistance. Clearly, this initiative is crucial for the thousands of entrepreneurs that have no other means of financing available to them.

By terminating the Microloan program and not reopening the participating securities program, the administration is turning its back on start ups of all types that need access to seed capital. Blocking access to start-up financing impedes the formation of new businesses and prevents the job growth that is still needed in so many parts of the country.

Small businesses are the major driver of this economy. While it is crucial that we work together to make sure they have the tools needed to thrive and be successful, I don't see the administration coming to the table with the interests of small businesses in mind. This agency's proposals repeatedly represent OMB's interests and not those of our nation's entrepreneurs. Small businesses deserve better than this.

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