[Congressional Record Volume 154, Number 153 (Thursday, September 25, 2008)]
[Senate]
[Page S9505]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY:
  S. 3596. A bill to stabilize the small business lending market, and 
for other purposes; to the Committee on Small Business and 
Entrepreneurship.
  Mr. KERRY. Mr. President, over the past several days the Federal 
Government has been called upon to bail out some of America's largest 
financial companies. While I recognize that swift action must be taken 
to prevent the collapse of our Nation's major financial institutions, 
like many other Americans, I believe we also should come to the aid of 
our Nation's small businesses, which are also imperiled by this 
financial crisis.
  Today the problems facing small firms and the banks that typically 
lend to them are not unlike those being faced by corporate America--
firms simply cannot access the capital they need to keep their small 
businesses afloat in the wake of this economic crisis. Although the 
Small Business Administration's loan programs were designed to reach 
these marginalized borrowers, there is ample evidence that the programs 
are failing to do so at this critical juncture.
  Last year, the SBA's 7(a) and 504 loan guarantee programs combined to 
provide over 100,000 American small businesses with essential 
financing, and they injected approximately $20 billion into our local 
businesses and communities. As a result of the financial crisis, 7(a) 
loans are down about 30 percent in terms of the number of loans made, 
and down about 11 percent in terms of dollars. Meanwhile, the number of 
504 loans has decreased about 16 percent and they are down 
approximately 15 percent in terms of dollars loaned for fiscal year 
2008. But these are more than just statistics; they are stark 
indications that the SBA's loan programs are not reaching enough of the 
small businesses that are now struggling to obtain affordable credit.
  The recent drop in SBA lending paints a picture of small business 
borrowers and lenders caught in a vicious cycle driven by the financial 
crises of the past year. On the lender side of the equation, struggling 
banks have become so concerned with risk that they have virtually cut 
off conventional small business borrowing, even to well-qualified 
firms. On the borrower side, the banks' extremely tight lending 
practices are preventing loans--SBA loans in particular--from serving 
small businesses that need capital to survive the current economic 
crisis. That is why I am introducing the Small Business Lending Market 
Stabilization Act of 2008--which will jump start SBA lending, helping 
thousands of American small businesses receive the financing they need 
to survive the current financial crisis.
  In April, as Chairman of the Senate Committee on Small Business and 
Entrepreneurship, I held a hearing to learn why the SBA loan programs 
were not reaching small businesses that were being squeezed out of the 
conventional loan markets by the credit crunch. Although the 
Administration refused to admit it at the time, virtually every other 
witness at the hearing told me that the SBA's increased fees played a 
significant role. The bill I have introduced today will address that 
problem by temporarily eliminating the fees that the SBA charges to 
borrowers, lenders, and ``Certified Development Companies'' for the 
7(a) and 504 loan guarantee programs. This will immediately reduce the 
cost of capital for SBA borrowers. With lower monthly loan payments, 
more money will be placed into the hands of small business owners--
money that will allow them to continue purchasing inventory and 
equipment. At the same time, the fee relief will also reduce the cost 
of lending for SBA's partners in the private sector, allowing them to 
make more small business loans through the programs.
  The bill also includes several provisions that will expand the 
universe of small businesses that can access the SBA's loan programs. 
For instance, one measure will permit certain borrowers to refinance a 
limited amount of their preexisting debt through a new 504 loan. This 
adjustment will allow 504 loans to reach small business owners who want 
to refinance their company's existing debt, but have been turned down 
by conventional lenders.
  The bill also contains measures that will give lenders greater 
flexibility in making SBA loans. One provision would allow the SBA to 
use ``weighted average rates'' when pooling loans for sale on the 
secondary market, making the secondary markets for SBA loans more 
efficient and improving liquidity among participating banks. Another 
provision would provide greater flexibility by directing the SBA to 
give lenders at least one alternative interest rate to the Wall Street 
prime rate, which will help reduce interest rate typically charged on 
7(a) loans.
  In short, the bill I am introducing today will provide much needed 
support for America's small businesses, helping them break free from 
the vicious cycle caused by the crisis in our financial markets. I will 
continue to work with my colleagues on both sides of the aisle to 
ensure that the massive Wall Street bailout proposal we have been asked 
to approve contains adequate protections for taxpayers. But I also urge 
my colleagues to join me in supporting this bill, which will provide a 
lifeline to hundreds of thousands of American small businesses along 
Main Street.
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