[Congressional Record (Bound Edition), Volume 155 (2009), Part 10]
[Extensions of Remarks]
[Page 13161]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        SMALL BUSINESS AID BILL

                                 ______
                                 

                           HON. BETSY MARKEY

                              of colorado

                    in the house of representatives

                        Wednesday, May 20, 2009

  Ms. MARKEY of Colorado. Madam Speaker, I rise today to urge my 
colleagues to support the Small Business Assistance in Debt Bill (Small 
Business AID Bill). The Small Business AID Bill will expand the U.S. 
Small Business Administration (SBA) 504 loan program to be used to 
refinance conventional, non-SBA loans. This bill will permit small 
business owners to access capital and tap into equity that is locked in 
their commercial real estate due to the financial and banking crisis. 
Market conditions have changed and are making it harder for small 
businesses to gain access to capital to continue investing in and 
expanding their businesses. My bill reduces risk to banks from 
conventional, non-SBA loans on their balance sheets while 
simultaneously infusing cash into the banking system. This change will 
not require additional taxpayer support or an additional Congressional 
allocation, since this program is self-supporting.
  Many small businesses have been ham-strung by today's economic 
conditions. Due to changes in the banking industry's ability and 
willingness to lend, small businesses are being squeezed out of capital 
markets. Banks, like most Americans, have been forced to tighten their 
belts; and banks have had to limit access to capital. With a lack of 
available capital, small businesses, the economic engine of America, 
are in crisis. Within the next year, approximately $2.5 billion in 
commercial loans will come due. Many banks will not be willing or able 
to renew these loans for small businesses, many whom will be unable to 
raise the necessary financing to survive. Other small businesses are 
being forced to stay in loans that are higher than today's current 
interest rates. Small businesses need another means to refinance their 
loans to weather this financial storm and potentially expand through 
new capital. By allowing SBA-backed lenders to extend financing small 
businesses will be able to: acquire land, construct buildings, or 
purchase equipment and collateralize fixed assets, avoid prepayment 
penalties, financing fees, and other costs. Small businesses will 
receive these benefits while obtaining better loan terms and lower 
interest rates for existing debt.
  A good way to illustrate how my bill works may be helpful to my 
colleagues: Acme Company owns a building that an appraiser values at 
$100,000. Acme owes $70,000 on the building to their local bank. Due to 
the economic and financial crises bank regulators require the bank to 
downgrade their loans with Acme. The bank severely restricts or 
eliminates Acme's line of credit. The absence of the line of credit 
causes a very real hardship, impacting Acme's cash flow. With the 
inability to manage cash, Acme is severely impacted and encounters 
problems with operating day-to-day. While Acme has equity in their 
building, their bank cannot and would not allow them to access this 
equity due to the downgraded borrower status. With my bill, the SBA 
would be able to offer a new 504 loan to Acme for up to $40,000 (since 
the bill limits lending up to 40% of the value of the property). With 
this new load, Acme would be able to unlock up to $20,000 worth of 
equity which they could use to maintain the business, retain jobs, or 
purchase new equipment to help the business grow again.
  There was very little immediate impact for small businesses from the 
American Recovery and Reinvestment Act. Banks' inability and sometimes 
unwillingness to assist small businesses will continue for some time 
and we must act now to help small businesses stay afloat. My bill 
assists small businesses by providing SBA guarantees for a portion of 
certain loans coordinated through Certified Development Companies 
(CDCs). These non-profit organizations work with local lenders to 
provide secure SBA-backed loans to small businesses. The SBA then 
guarantees a portion of the loan, reducing the risk to lenders and 
dramatically increasing small businesses' access to capital. Until this 
bill, CDC loans were only available for new businesses or business 
expansion; but with this bill these loans would be available to 
refinance existing debt. By refinancing small businesses will continue 
to be current on their existing loans with SBA lenders. The lack of 
access to working capital depresses small businesses, resulting in a 
corresponding increase in unemployment rates.
  In today's economy, small businesses are struggling. My bill assists 
small businesses to pull themselves up without any government handout 
or bailout. They will be able to refinance their current debt so that 
they can invest in new facilities, equipment, or hire additional 
workers. I urge all members to support the Small Business AID Bill.

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