The Senate voted 74-20 to approve a short-term spending bill with a provision extending the Small Business Administration (SBA) 7(a) guaranteed lending program.
The vote came hours before the deadline for President Donald Trump to sign the bill into law and prevent a stoppage in funding for the program. The legislation authorizes funding for the program through Dec. 20.
Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey noted in a letter to Senate leaders ahead of the vote that community banks’ prolific use of the program, as they are responsible for nearly 50 percent of the nation’s small business loans.
“The 7(a) program is normally funded by user fees. However, program funding is determined by a federal credit subsidy rate estimate which we and other industry participants believe overestimates the expected default rate in fiscal year 2020,” Romero Rainey wrote. “For this reason, we fully expect that any appropriated funds will be returned to the Treasury. The subsidy rate needs to be adjusted to more accurately forecast the default rate.”
She asserted that failure to pass the bill would have resulted in an “abrupt cut off of credit to thousands of small businesses that rely on this program for working capital, investment and expansion,” as well as disruption to the economic expansion generated from small businesses and job losses.
The National Small Business Association (NSBA) CEO Todd McCracken also stressed the importance of preventing a lapse in program SBA 7(a) funding in a September statement.
“One-in-four small businesses are unable to get the financing they need,” McCracken said. “SBA lending is a critical option for many small businesses caught in a lending market that remains stacked against them. One of the few bright spots in small-business lending should be strengthened, not loaded-up with unnecessary fees.”