Senate committee considers SBA lower fees

WASHINGTON (5/16/07)—Legislation that could improve credit union access to Small Business Administration (SBA) guarantee lending programs is expected to take another step forward today. The Senate Committee on Small Business and Entrepreneurship is scheduled to vote on The Small Business Lending Reauthorization and Improvements Act (S. 1256).

The bill was introduced by Sens. John Kerry (D-Mass.) and Olympia Snowe (R-Me.), who are chairman and ranking member respectively of the small business panel. It is co-sponsored by Sens. Barack Obama (D-Ill), Carl Levin (D-Mich.), Mary Landrieu (D-La.), and Jon Tester (D-Mont.).

As introduced it would:

• Authorize the SBA to back more than $87 billion in loans over the next three years;

• Direct the SBA to establish an optional standard for determining if a borrower is a small business and eligible for an SBA loan, making it easier to determine who qualifies;

• Allow small businesses to receive the maximum amounts under both the 7(a) and 504 programs; and

• Re-establish an Office of Minority Small Business Development to make sure the government's programs are reaching minorities; and more.

The bill also would greatly expand the SBA's micro loan program, providing more technical assistance, grants and funding which would make the program more attractive for community credit unions to serve as micro loan intermediaries.

The only point in common that the Senate bill has with an SBA bill passed last month by the House is one that would provide a rural lending outreach program with an 85% guarantee for loans under $250,000 given under the SBA 504 (f) program.

In late April, the House voted 380 to 45 to approve The Small Business Lending Improvements Act of 2007 (H.R.1332). That bill could help credit unions and other small lenders increase participation in the SBA's 7 (a) program by restoring such things as a streamlined application process.

An important difference between the two versions is that the Senate bill goes further to reduce program fees to lenders and borrowers, a goal strongly advocated by the Credit Union National Association (CUNA).

The Senate bill would require that fees be reduced to no more than the cost of the loan guarantees. The House bill directs the SBA to reduce lender and borrower fees to the extent permitted by appropriations.

However, even though the SBA legislation appears to be making early progress this year, CUNA's Debbie Kwon-Moore warned that credit unions should not anticipate changes to the SBA rules to occur very quickly.

If the Senate Committee votes to approve its version of the legislation, it would need still to be approved by the full Senate. That could take a while, said Kwon-Moore, senior legislative representative, since the Senate's legislative plate is quite full already.

If approved by the Senate, differences between the House and Senate bills would have to be worked out by an intermediary conference committee, approved again by House and Senate, and then sent to the White House for the President's signature.