[Congressional Record Volume 151, Number 106 (Friday, July 29, 2005)]
[Senate]
[Pages S9523-S9524]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE:
  S. 1603. A bill to establish a National Preferred Lender Program, 
facilitate the delivery of financial assistance to small businesses, 
and for other purposes; to the Committee on Small Business and 
Entrepreneurship.
  Ms. SNOWE. Mr. President, I rise today to discuss a bill, the Small 
Business Lending Improvement Act of 2005, which I have introduced today 
to provide small businesses with easier access to loans and to increase 
efficiency in the Small Business Administration's largest loan program, 
the 7(a) program, which provided $12.7 billion in small business loans 
in 2004.
  As Chair of the Senate Committee on Small Business and 
Entrepreneurship, I am committed to supporting our Nation's Main Street 
small business community by increasing its access to capital. This 
legislation will reform a cumbersome SBA lender licensing process that 
does not provide our small businesses with the most efficient means of 
accessing the capital they must have to start and sustain their firms. 
The bill would allow the SBA's 7(a) loan program to better capitalize 
on the demonstrated potential small business have to create jobs and 
economic growth.
  As our Nation continues to prosper from economic growth, low 
inflation, and low unemployment, we should not forget the critical role 
played by our small businesses. Without strong and successful small 
businesses, our prosperity would not be what it is today.
  Under current law, the most prolific lenders in the SBA's 7(a) loan 
program can participate in the ``Preferred Lender Program'' (PLP 
Program), which allows them to use their own processing facilities and 
therefore both increases lenders' efficiency and reduces costs for the 
SBA. However, PLP lenders are required to apply for PLP status in each 
of the 71 SBA districts nationwide to obtain PLP status in that 
district, and they must re-apply each year in each district. This is 
extremely inefficient and wasteful, and creates enormous unnecessary 
administrative costs.
  Section 2 of this bill would allow qualifying lenders to participate 
in the PLP Program on a nationwide basis after just one licensing 
process. This provision was in S. 1375, the Small Business 
Administration 50th Anniversary Reauthorization Act of 2003, which I 
introduced in 2003 and which the Senate approved unanimously in 
September 2003.
  This provision would drastically reduce administrative costs and 
would standardize the operation of the PLP program. A National 
Preferred Lenders Program would eliminate the inefficiencies and cost 
of applying for PLP status in each district, and would increase the 
ease with which loans are made to small businesses, thereby improving 
small businesses' access to capital. Competition among lenders for 
small business customers would increase, increasing financing 
alternatives and lowering costs for small businesses.
  In addition to simplifying licensing processes for both lenders and 
the SBA, the bill would allow the SBA's lender oversight to be done 
more efficiently and effectively, on a national basis. The current 
process of having to renew licenses in each district is extremely time-
consuming and administratively burdensome for the lenders and the SBA. 
A National Preferred Lenders Program could remedy the inefficiencies 
and cost of applying for PLP status in each district and save a 
tremendous amount of taxpayer dollars.
  Section 3 of the act increases the maximum size of a 7(a) loan to $3 
million, from the current $2 million, and increase the maximum size of 
a 7(a)

[[Page S9524]]

guarantee to $2.25 million, from the current $1.5 million. This would 
maintain the maximum 75 percent guarantee. Small businesses' financing 
needs are increasing and, especially with the high cost of real estate 
and new equipment, it is appropriate to respond to those needs by 
offering larger loans.
  In the SBA's 504 Loan Program, loans may now be as large as $10 
million, with $4 million guaranteed, for manufacturing projects, $5 
million (with $2 million guaranteed) for loans that serve an enumerated 
public policy goal (such as rural development), and $3.75 million (with 
$1.5 million guaranteed) for all other ``regular'' 504 Program loans. 
Thus, this increase in 7(a) Program loans to $3 million would bring 
7(a) loans closer in size to 504 Program loans, while still leaving 
7(a) loans smaller than 504 Program loans.
  Section 4 of the bill increases the program's authorization level to 
$18 billion for fiscal year 2006, instead of the $17 billion authorized 
for fiscal year 2006 in the Omnibus Appropriations Act, enacted in 
December 2004. The program is on pace to achieve loan volume of between 
$14 and $15 billion in fiscal year 2005, and this provision would allow 
the program adequate ability to grow unimpeded in fiscal year 2006, 
especially if the maximum loan size is increased.
  Section 5 of the bill requires the SBA to implement an alternative 
size standard, in addition to the program's current standard, for the 
7(a) program. The SBA would create an alternative size standard for the 
7(a) program, as it has already done for the 504 program, that 
considers a business's net worth and income. This provision would bring 
the 7(a) program into conformity with the 504 Program. This provision 
was also in S. 1375 in the 108th Congress, passed unanimously by the 
Senate in 2003.
  Currently, in the 7(a) program a small business's eligibility to 
receive a loan is determined by reference to a multipage chart that has 
different size standards for every industry that can be very confusing, 
especially for small lenders that do not make many 7(a) loans. In the 
504 Program, however, lenders can use either the industry-specific 
standards or an ``alternative size standard'' that the SBA created, 
which simply says a small business is eligible for a loan if it has 
gross income of less than $7 million or net worth of less than $2 
million.
  This would simplify the 7(a) lending process and provide small 
businesses with a streamlined procedure for determining if they are 
eligible for 7(a) loans, and it would conform the standards used by the 
7(a) and 504 programs. It would make the program far more accessible to 
small businesses and small lenders.
  All of these improvements to the SBA's largest loan program will 
support our national goal of building a vibrant and growing economy. 
Small businesses are the heart of our economy, and this bill will help 
to improve small businesses' economic prospects.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1603

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Lending 
     Improvement Act of 2005''.

     SEC. 2. NATIONAL PREFERRED LENDERS PROGRAM.

       Section 7(a)(2) of the Small Business Act (15 U.S.C. 
     636(a)(2)) is amended by adding at the end the following:
       ``(E) National preferred lenders program.--
       ``(i) Establishment.--There is established the National 
     Preferred Lenders Program in the Preferred Lenders Program 
     operated by the Administration, in which a participant may 
     operate as a preferred lender in any State if such lender 
     meets appropriate eligibility criteria established by the 
     Administration.
       ``(ii) Terms and conditions.--An applicant shall be 
     approved under the following terms and conditions:

       ``(I) Term.--Each participant approved under this 
     subparagraph shall be eligible to make loans for not more 
     than 2 years under the program established under this 
     subparagraph.
       ``(II) Renewal.--At the expiration of the term described in 
     subclause (I), the authority of a participant to make loans 
     for the program established under this subparagraph may be 
     renewed based on a review of performance during the previous 
     term.
       ``(III) Effect of failure.--Failure to meet the criteria 
     under this subparagraph shall not affect the eligibility of a 
     participant to continue as a preferred lender in a State or 
     district in which the participant is in good standing.

       ``(iii) Implementation.--

       ``(I) Regulations.--As soon as is practicable, the 
     Administrator shall promulgate regulations to implement the 
     program established under this subparagraph.
       ``(II) Program implementation.--Not later than 120 days 
     after the date of enactment of this subparagraph, the 
     Administrator shall implement the program established under 
     this subparagraph.''.

     SEC. 3. MAXIMUM LOAN AMOUNT.

       Section 7(a)(3)(A) of the Small Business Act (15 U.S.C. 
     636(a)(3)(A)) is amended by striking ``$1,500,000 (or if the 
     gross loan amount would exceed $2,000,000)'' and inserting 
     ``$2,250,000 (or if the gross loan amount would exceed 
     $3,000,000)''.

     SEC. 4. SECTION 7(A) AUTHORIZATION FOR FISCAL YEAR 2006.

       Section 20(e)(1)(B)(i) of the Small Business Act (15 U.S.C. 
     631 note) is amended by striking ``$17,000,000,000'' and 
     inserting ``$18,000,000,000''.

     SEC. 5. ALTERNATIVE SIZE STANDARD.

       Section 3(a)(3) of the Small Business Act (15 U.S.C. 
     632(a)(3)) is amended--
       (1) by striking ``When establishing'' and inserting the 
     following: ``Establishment of Size Standards.--
       ``(A) In general.--When establishing''; and
       (2) by adding at the end the following:
       ``(B) Alternative size standard.--
       ``(i) In general.--Not later than 180 days after the date 
     of enactment of this subparagraph, the Administrator shall 
     establish an alternative size standard under paragraph (2), 
     that shall be applicable to loan applicants under section 
     7(a) or under title V of the Small Business Investment Act of 
     1958 (15 U.S.C. 695 et seq.).
       ``(ii) Criteria.--The alternative size standard established 
     under clause (i) shall utilize the maximum net worth and 
     maximum net income of the prospective borrower as an 
     alternative to the use of industry standards.
       ``(iii) Interim rule.--Until the Administrator establishes 
     an alternative size standard under clause (i), the 
     Administrator shall use the alternative size standard in 
     section 121.301(b) of title 13, Code of Federal Regulations, 
     for loan applicants under section 7(a) or under title V of 
     the Small Business Investment Act of 1958 (15 U.S.C. 695 et 
     seq.).''.
                                 ______