Senate Hearing Focuses on Credit Availability

Panelists discuss lending increases, payment issues

Under current SBA rules, the organization’s technical assistance grant could be reduced in the next fiscal year, which will make it more difficult to expand lending and service existing borrowers. Garvin suggested that organizations such as hers should receive the same consideration and assistance that larger lenders have to keep capital flowing.

The recovery bill also included a provision for $50 million in loans to micro-lending intermediaries and $24 million in technical assistance to accompany the loans on top of the funds already budgeted for the agency’s micro-lending program. The SBA, said Mills, is working to attract new micro-lending partners to broaden the program’s reach.
In addition, $255 million has been allocated to a new America’s Recovery Capital, or ARC, program to provide loans of up to $35,000 to help “viable” small businesses experiencing financial hardship.

ARC loans can be used to pay interest and principal on existing non-SBA debt for up to six months. Mills said she expects there will be a high demand for ARC loans and the SBA will provide more details on it during the National Small Business Week conference that begins next Monday.

Bill Bynum, CEO of the Enterprise Corporation of the Delta/Hope Community Credit Union, based in Jackson, Mississippi, suggested that the SBA make operating lines of credit eligible for guaranty under the SBA’s 7(a) program and that it should make community development financial institutions eligible for certification as SBA lenders. He said the latter would substantially increase the ability of CDFIs to expand the use of SBA programs in underserved markets and provide additional liquidity for them through the sale of guarantees on the secondary market.

“I think it’s important that the Senate is looking at alternative financing sources because historically minority businesses have not had as much access to mainstream financial institutions as traditional non-minority companies. CDIFs have been much more successful in routing credit into minority communities,” Bynum said after the hearing.

“It’s important that the committee looks at alternate sources such as these and provide capital not just to large banks that aren’t going to and historically haven’t lent in these communities, and that when the economy starts to revive, aren’t going to all of a sudden start doing something they haven’t done before, but also look at financial institutions that have as a priority serving all Americans, not just those who live in affluent communities or may fit a certain formula.”

He added that community banks have frozen credit while waiting for the economy to revive.

“While they’re waiting, small businesses are going without critical capital. So it’s really important to look at credit unions, CDIFs, and minority banks and see how we can increase their ability to lend to these communities,” Bynum said.

“If [government] is serious about an equitable recovery, they’ve got to look at financial institutions that have it as a priority to lend to historically distressed and underserved communities like minorities, women and rural areas.”
While any efforts to increase funding are welcome, small businesses, particularly those owned by minorities, have expressed anxiety over their ability to get their fair share of prime and subcontracting opportunities.

In response, Mills said, the SBA plans to provide an online listing of subcontracting opportunities through the recovery act and has increased the maximum contracting amount from $2 million to $5 million so that small businesses that might not otherwise qualify can compete for larger value recovery act and other projects.

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