SMALL BUSINESS LENDING
- ICBA promotes the Small Business Administration loan programs and federal policies that foster a vibrant small business sector.
- SBA One must preserve quality loan underwriting and thorough borrower assessment.
- The CFPB should exempt community banks from reporting data on small business loans under forthcoming regulations required by statute. Additionally, the CFPB should not use its authority to impose requirements beyond those mandated by statute.
- ICBA continues to enhance its small business sector relationships and coalition building.
Community banks are prodigious small business lenders. Though they hold less than 20 percent of U.S. banking industry assets, they hold a disproportionate market share of small business loans – 55 percent – supporting a sector responsible for more job creation than any other. The viability of community banks is linked to the success of their small business customers. Community bank small business lending simply cannot be duplicated by a bank based outside the community. As noted in a recent study by scholars at Harvard’s Kennedy School of Government: “In certain lending markets, the technologies larger institutions can deploy have not yet proven effective substitutes for the skills, knowledge, and interpersonal competencies of many traditional banks.”
SBA Loan Program Funding. Numerous community banks participate in the Small Business Administration's guaranteed lending programs that provide needed capital to small businesses nationwide. The long-term viability of the SBA lending programs is important to the community banking sector and their small business customers. ICBA will continue to advocate for essential funding for SBA loan programs that will allow community banks to provide credit to small business in the most cost efficient manner. ICBA calls for a SBA 7(a) federal appropriation to help offset the steep fees on SBA lenders and borrowers.
SBA One. ICBA welcomes SBA’s introduction of the SBA One streamlined lending initiatives as long as the associated program changes recognize the need to preserve quality loan underwriting and thorough borrower assessment. SBA should not promote the origination of loans that increase risk to lending programs in order to get more loans into the hands of small business borrowers. The origination of small business loans requires careful attention to a borrower’s needs to ensure the borrower is not placed in a loan with an unacceptable risk profile.
Small Business Data Collection. Under Dodd-Frank Section 1071, CFPB is required to implement rules for the collection and reporting of data on financial institutions’ small business lending under the Equal Credit Opportunity Act. This requirement covers the collection of certain data in connection with credit applications made by women- or minority-owned businesses and small businesses, including the race, sex, and ethnicity of the principal owners of the business. This data collection will impose significant new burdens on community banks already absorbing numerous other regulatory requirements.
Small Business Sector Relationships. The vitality of small business and the strength of the community banking industry are connected. ICBA will nurture and enhance working and advocacy relationships with small business industry alliances and coalitions to leverage the critical role community banks serve in the well-being of their small business customer base.