[Congressional Record Volume 140, Number 89 (Tuesday, July 12, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: July 12, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
     A BILL TO CREATE THE SMALL BUSINESS ACCREDITED LENDERS PROGRAM

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                           HON. GLENN POSHARD

                              of illinois

                    in the house of representatives

                         Tuesday, July 12, 1994

  Mr. POSHARD. Mr. Speaker, today, I am introducing a bill which, if 
enacted, will allow one of the Federal Government's most effective 
small business programs to serve that key sector of our economy even 
better. The bill authorizes the Small Business Administration [SBA] to 
implement on a nationwide basis an Accredited Lenders Program within 
its 504 loan-guarantee program--a program which already is delivering 
outstanding benefits to the Nation's small businesses.
  By creating an Accredited Lenders Program, or ALP the SBA can achieve 
an important goal: It can speed the turnaround time for thousands of 
small businesses applying for 504 loans. Anyone who talks regularly 
with small business people knows that waiting for credit very often can 
mean the difference between an important deal happening and its falling 
through. That means jobs which either will or will not be created.
  The purpose of the 504 program is to help small businesses expand 
with long-term capital for physical plant and equipment. Under the 
program, the SBA guarantees loans made by local Certified Development 
Companies [CDC's] to small businesses. The small businesses in turn 
must obtain 50 percent financing through private financial institutions 
and must also provide 10 percent equity themselves.
  Demand for the program has been skyrocketing during the past several 
years, as has the number of jobs it creates. According to the National 
Association of Development Companies [NADCO], the 504 program and its 
predecessor 503 program have funded over 13,000 small businesses since 
1981, creating over 350,000 jobs. The SBA's Allan Mandel calculates 
that--because of the very low, 0.5-percent Federal subsidy rate on the 
privately underwritten debentures which fund the CDC loans--this 
program actually creates or retains jobs at the amazing rate of 
approximately $49 in taxpayer expenditure per job. When we talk about 
Federal Government support for small businesses, SBA's 504 program 
clearly is a major success story.
  This bill would simply apply to the 504 program a concept already in 
operation in SBA's 7(a) loan-guarantee program--the agency's largest 
program. The idea also is in operation in a pilot project being 
conducted by the SBA with a select group of 504-program CDC's. The 
concept is to rely during SBA's guarantee-approval process on the 
credit analysis conducted by qualified professional staff of lenders 
with an established record of utilizing the program successfully, 
rather than requiring SBA loan officers to duplicate that credit 
analysis. This would allow the SBA to complete documentation for and 
guarantee 504 loans quickly, usually within 5 working days. It also 
will reduce workload and paperwork for SBA's own loan officers, who are 
overburdened due to significantly increased program demand at the very 
time that the agency is being forced to reduce its work force.
  It is important to point out that these benefits can be achieved 
without exposing taxpayer dollars to significant new risk. Loss rates 
will be carefully monitored, and only those CDC's who maintain an 
excellent record will receive expedited treatment.
  The bill is consistent with other important steps being taken by SBA 
Administrator Erskine Bowles to improve and streamline his agency's 
service to its ultimate customer--small businesses. SBA supports the 
idea, and I believe it will have the support of the small business 
committees of both the House and the Senate, as well.
  Mr. Speaker, we all know that small firms have been the engine for 
our economy's job creation in recent years. I hope this proposal, which 
would significantly improve the operation and service of an excellent 
small business credit program without additional taxpayer cost, can 
become law this year.

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