By Steve Keen
While the House of Representatives prepares to take up bipartisan community bank regulatory relief, another ICBA priority recently passed through the chamber virtually unnoticed. With the nation recognizing Small Business Month in May, the House last week approved pro-community bank legislation to strengthen the Small Business Administration 7(a) program.
The bipartisan Small Business 7(a) Lending Oversight Reform Act (H.R. 4743) includes targeted reforms to ensure the continued availability of the SBA 7(a) program, which allows community banks to provide credit to a broader range of borrowers who would not qualify for a conventional loan.
As ICBA testified earlier this year, the 7(a) program is fully funded by user fees—not taxpayer dollars—though Congress must approve a program authorization level every year. When that cap is reached, lending under the program must be suspended. That is exactly what happened in 2015, requiring ICBA-supported emergency legislation.
To strengthen the program, H.R. 4743 would:
- stabilize 7(a) program funding by allowing the SBA to lift the cap on general business loans by up to 15 percent of the limit if it is determined the cap will be reached;
- improve the integrity of SBA programs by codifying the SBA Office of Credit Risk Management and Lender Oversight Committee, increasing transparency in the office’s budget, and providing guidelines for lender reviews and lender appeals rights; and
- safeguard the 7(a) program from abuse by codifying the SBA’s “Credit Elsewhere Test,” which requires lenders to fully substantiate and document the reasons a given applicant cannot be served with conventional credit.
Following passage in the House, attention turns to the Senate, where companion legislation (S. 2283) passed through the Senate Small Business Committee in March. ICBA will continue pushing for full passage of these reforms to ensure the SBA 7(a) program can continue meeting the needs of the nation’s small businesses.
Steve Keen is ICBA vice president of congressional relations.