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ICBA Tells Congress to Support Key Small Business Lending Programs, Be Cautious When Weighing New Regulatory Reform Proposals

Washington, D.C. (October 14, 2009)—The Independent Community Bankers of America (ICBA) today urged Congress to support several key Small Business Administration (SBA) initiatives to help community banks continue lending to their small business customers during these challenging economic times when lending is needed most. At the same time, ICBA reminded lawmakers to be cautious with any new regulatory reform proposals so that our nation’s more than 8,000 community banks are not unduly burdened.

“America’s small business sector is more important than ever and is a critical component of our country’s economic recovery,” said R. Michael Menzies, ICBA chairman and president and CEO of Easton Bank and Trust Co., Easton, Md., in his testimony before the House Committee on Small Business. “Even with tremendous fiscal and monetary stimulus and SBA incentives, efforts by community banks to expand lending will be hamstrung if regulatory burdens are dramatically increased. The bank regulatory pendulum has swung too far and is crushing many community banks’ ability to lend to deserving small businesses. Community banks did not cause the current financial crisis fostered by the missteps of the too-big-to-fail banks and unregulated firms. Lawmakers must be cautious so that the missteps of a few large financial players do not foster costly new regulatory burdens on all financial institutions.”

Menzies went on to say that while community banks represent about 12 percent of all bank assets, they support 31 percent of all small business loans that are less than $1 million. He also noted that half of all small business loans under $100,000 are made by community banks. Citing the FDIC’s latest quarterly data profile, Menzies said that small banks with $1 billion in asset size or less were the only segment to show an increase in their net loans and leases.

The Maryland community banker told Congress that while the American Recovery and Reinvestment Act has helped many small businesses ride out this deep recession, more still needs to be done. Specifically, he asked Congress to support the following:

  • Extend the SBA fee reductions and higher guarantee levels through fiscal year 2011;
  • Make permanent the Rural Outreach and Community Express programs;
  • Increase the SBA 7(a) loan limit from $2 million to $3 million; and,
  • Make permanent the SBA secondary market facility authority.

Menzies thanked the Small Business Committee for proposing a robust SBA authorization level. He said that ICBA supports $17.5 billion in 7(a) program authority through fiscal year 2011 and allowing alternative loan size standards for determining eligible small business borrowers.

“The best way to meet small business capital needs is to have diversity in SBA lending options,” Menzies said. “We don’t want an SBA with a one-size-fits–all, cookie-cutter approach that only the biggest-volume SBA lenders can fully use. If we are concerned with supplying small businesses with a steady source of capital, the SBA needs to do a better job of embracing the more than 8,000 community banks nationwide so all lenders can easily participate.”

ICBA thanks House Small Business Committee Chairwoman Nydia Velazquez (D-N.Y.), Ranking Member Sam Graves (R-Mo.) and the other members of the committee for holding this hearing.