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What They Are Saying: Small Business Organizations Support Luetkemeyer's H.R. 6037
Legislation to prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) loan program
WASHINGTON, D.C. - On November 18, 2021, House Committee on Small Business Ranking Member Blaine Luetkemeyer introduced H.R. 6037, legislation to prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) loan program. All Committee Republicans cosponsored this legislation.
This legislation would prohibit the SBA Administrator from directly making loans under the 7(a) loan program. The Democrats continue to push for massive government expansion, including the direct lending option under the 7(a) loan program. This is foreshadowing a movement away from private sector lenders having a role within these programs toward a sole government lending option.
This is troublesome as the private sector delivers specific efficiencies through competition that the government cannot. Additionally, private sector lenders provide robust protections against fraudulent activity due to numerous federal financial rules and regulations. The government should not be in the business of making direct loans.
In response, numerous lending and small business associations have come forward in support of Ranking Member Luetkemeyer's bill, H.R. 6037.
The link to the H.R. 6037 bill text can be found here.
What They Are Saying:
Alejandro M. Sanchez, President and CEO of the Florida Bankers Association: "On behalf of Florida's community, regional and larger banks, I am writing in support of your legislation, H.R. 6037, to prohibit the Administrator of the Small Business Administration (SBA) from directly making loans under the 7(a) Loan Program. The SBA 7(a) program just had a record year for the amount of loans approved to aid small businesses. Creating a direct lending program is inappropriate and not necessary. Prior to the COVID-19 pandemic, Florida Bankers Association (FBA) member banks were some of the most active 7(a) lenders in the country, facilitating SBA-backed loans of all sizes."
Alfredo Ortiz, President and CEO of the Job Creators Network: "Ranking Member Luetkemeyer continues to defend small businesses from the war on small businesses being waged by President Biden and Congressional Democrats. His legislation to prohibit the Small Business Association from direct lending in the 7(a) Loan Program will protect small business access to credit when it’s needed most. Democrats want a government takeover of small business loans and will use the SBA as a vehicle to achieve this goal unless stopped. Rep. Luetkemeyer’s legislation will ensure continued access to credit from efficient and fast-moving private-sector lenders whom small businesses depend on for their loans. As small businesses bring the economy back from the pandemic-induced recession, robust access to these longstanding credit sources is vital. On behalf of American small business owners, JCN commends Rep. Luetkemeyer from protecting this lifeblood of the small business economy.”
Brad Thaler, Vice President of Legislative Affairs of the National Association of Federally-Insured Credit Unions: "We share your concern that the government does not belong in the business of making loans, and historically has been unsuccessful at lending. We agree that the 7(a) program is important for small businesses and we thank you for your leadership in introducing this timely legislation to protect the integrity of the program. NAFCU recognizes the need for more small business loans, however, we believe that there are better ways to work with existing lenders to address the stated need of access to smaller loans to small businesses and we stand ready to work with you to achieve that goal."
Chris Furlow, President and CEO of the Texas Bankers Association, the nation’s oldest and largest state banking organization: "If the goal is to speed and expand access to capital, enabling direct loans from the government will be counter-productive. We firmly believe this ill-conceived effort would result in billions of dollars in nonperforming loans, that would be more in line as a grant program. The SBA has shown its value in its partnership with community banks throughout its history. Congress must pass Ranking Member Luetkemeyer’s bill that will prohibit SBA from essentially replacing effective private sector lending capabilities with more bureaucracy and they should strengthen the 7(a) program rather than compete with it.”
David Caris, CEO of the Community Bankers of Iowa: "The federal government should not be competing head to head with community banks to offer direct loans from the SBA! We’ve seen this movie before with the Farm Credit System currently loaning directly to affluent farmers, which was not the original intent. If this gets started, regardless of initial limits, the federal government will eventually drive community banks out of business since the SBA doesn’t pay taxes and community banks do."
Doug Wareham, President and CEO of the Kansas Bankers Association: “The Kansas Bankers Association (KBA) strongly supports H.R. 6037, which would prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) Loan Program. Through the years, Kansas banks and local SBA offices have developed partnerships which have successfully served the needs of businesses of all sizes. This public/private partnership works because each party has specific time-tested expertise that is utilized during the life of the transaction. To expect the SBA to understand the complexities of loan underwriting in such a short period of time and without the regulatory safeguards that exist for banks, as prescribed by the Build Back Better proposal, would not be in the best interest of small businesses, private-sector lenders and the American taxpayer. We applaud Congressman Luetkemeyer for introducing H.R. 6037.”
Edward J. Hill, Senior Vice President and Head of Government Relations of the Bank Policy Institute: "The Bank Policy Institute is sending this letter in support of HR 6037, a bill to prohibit the Small Business Administration from making loans directly under the 7(a) loan program. This legislation recognizes and helps preserve the important relationships between small businesses and their banks...In summary, the SBA partnership with banks has been strong, effective, and successful. A program that substitutes private sector expertise, technology investments and customer service capabilities with government inefficiency would result in a worse experience for small business customers and greater costs for taxpayers."
Gordon Fellows, President and CEO of the Mississippi Bankers Association: "PPP taught us all many lessons, and one important point we should all remember going forward is how effectively local banks and the government can work together, not against each other, to support small businesses. Creating new government-advantaged competition will deprive businesses of the local expertise and support that a banker would give them and will create new risks for taxpayers. Both seem like poor ideas to Mississippi banks. Small businesses would be better served by the SBA working to expand the number of banks and other private lenders that participate in 7(a) and reduce loan application wait times for participating lenders – the long wait times are often cited as the biggest impediment to 7(a) participation."
James C. Ballentine, Executive Vice President of Congressional Relations and Political Affairs of the American Bankers Association: "On behalf of the American Bankers Association (ABA), I am writing in support of H.R. 6037, legislation to prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) loan program. As you know, ABA member banks have a strong partnership with the SBA and work closely with the agency to provide financing to small businesses across the country through existing SBA programs. We believe that public-private partnership, especially bank participation in the successful 7(a) program and the more recent Paycheck Protection Program, has provided much-needed financial support to the nation’s small businesses."
Jeff W. Dick, Chairman and CEO of MainStreet Bancshares, Inc. and MainStreet Bank: "I am writing today to support the passage of H.R. 6037, which would prohibit the administrator of the Small Business Administration from directly making loans under the 7(a) loan program. Small business lending is based upon a strong relationship between the borrower and the lender. Among other things, the lender needs to be present in good times and in bad times, to work with the borrower so that he/she can be successful. Anyone who has worked with the SBA under various programs knows that the rules are interpreted as black or white. Business generally runs amidst shades of gray. Please support the expeditious passage of H.R. 6037.”
Jim Amundson, President and CEO of the Independent Community Bankers of Minnesota: "The Independent Community Bankers of Minnesota (ICBM) proudly represents nearly 200 community banks in Minnesota. We strongly support Ranking Member Luetkemeyer’s bill (H.R. 6037) which would prohibit the Small Business Administration from making direct loans under the 7(a) programs...Ultimately, the SBA has a poor track record in direct lending and any new attempts to do so promise to be less effective and more costly than private lenders. The 7(a) program has been successful because community banks and the SBA have worked together, and each party plays an important role. Community banks rely on their local knowledge of their markets and economies and the SBA provides important support for borrower’s who might not otherwise receive the capital they need. Because of this, the Independent Community Bankers of Minnesota strongly oppose any attempt to cut community banks out of the SBA 7(a) loan program.”
Jim Nussle, President and CEO of the Credit Union National Association: "This public private partnership works as borrowers can obtain loans from financial institutions that they know well and that have vested interests in their borrowers’ success. Furthermore, when working with local lenders, small businesses are likely to benefit from guidance and experience from a lender with a stake in helping the borrowing business succeed. By becoming a direct lender to small businesses, the SBA is likely to harm local financial institutions’ relationships with businesses and possibly hamper these businesses from establishing important banking relationships that can only help their business survive and flourish. As such, we strongly support your legislation and other efforts to prevent SBA direct lending."
John McNair, President and CEO of the Community Bankers Association of Georgia: "The Community Bankers Association of Georgia is appreciative and supportive of Rep. Luetkemeyer’s efforts and stands behind the ICBA letter of support.”
Karen Kerrigan, President and CEO of the Small Business and Entrepreneurship Council: "Emergency lending by the SBA in times of crisis is warranted at times, but direct lending would result in unintended fallout for taxpayers, small businesses and the community financial institutions that local businesses depend upon. Direct lending by the SBA is a bad idea. SBE Council fully supports Ranking Member Luetkemeyer and his colleagues in their work to advance legislation that prevents it from happening."
Kevin L. Shivers, CEA, President, and CEO of the Pennsylvania Association of Community Bankers: “Community Banks responded quickly to the pandemic, delivering billions of dollars in PPP lifelines to American small businesses. The US Small Business Administration was an important ally in this process. But the agency alone lacks the resources and the local relationships to effectively meet small-business capital needs. The SBA and the Biden Administration instead should work to expand the number of community banks eligible to serve small businesses through the 7a program.”
Kraig Lounsberry, President of the Community Bankers Association of Illinois: "Community banks are far superior at establishing and prudently underwriting commercial lending relationships. One needs to look no further than the SBA Inspector General Report (Number 20-21) which raised red flags about the SBA’s Economic Injury Disaster Loan (EIDL) program and warned that billions may have been fraudulently directed to or obtained by ineligible businesses. The SBA’s performance in making 7(a) loans will undoubtedly result in similar lapses which will put billions of taxpayer dollars at risk of loss. Thank you again for your leadership on this issue. CBAI will adamantly oppose any attempt to authorize direct 7(a) lending by the SBA and we strongly support your legislation to prohibit such authority."
Max Cook, President and CEO of the Missouri Bankers Association: "On behalf of the Missouri Bankers Association (MBA), I am writing to express our support for your legislation, H.R. 6037, which would prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) Loan Program. The MBA’s members understand the need for capital availability for Missouri’s entrepreneurs and small businesses as those customers are the backbone of our communities and economy. As such, those businesses and their needs are the focus of our work every day. The public-private partnership that the banking community and the SBA have had for decades has and continues to work extremely well. Establishing a direct 7(a) lending program would erode the efficiencies that come from private sector competition as well as the protections from fraud that exist due to existing rules and regulations. We thank Congressman Luetkemeyer for introducing this extremely important legislation and stand ready to help in every way to secure its passage.”
Michael Adelman, President and CEO of the Ohio Bankers League and Evan Kleymeyer, Senior Vice President of Government and External Relations of the Ohio Bankers League: "We have seen time and time again that when the Federal government offers direct lending programs, they directly compete and take business away from banks who reinvest in the communities they serve. Local banks are in the best position to know their communities well enough to both lend to small businesses while meeting the other credit needs of their communities as well as serving their communities in other ways...We share your concern that the government does not belong in the business of making loans, and historically has been unsuccessful at lending. Additionally, we are concerned once this is allowed it will create a slippery slope where Congress can simply increase the threshold for SBA direct lending forcing all loans to go directly through the SBA."
Michael J. Tierney, President and CEO of the Community Bankers of Michigan: "We are thrilled Representative Luetkemeyer is on the case. Community banks have been great partners with the SBA in the PPP program, the 7a program, and the 504 program and the banks should be the ones making the credit decisions. When you move credit decision making further from the customer and the community – you get fraud like what happened with fintech’s in the PPP program. Lessons learned should not be forgotten and having banks lend directly to small businesses in their communities is the best solution for all parties. The SBA does not have the resources or the expertise to do direct lending effectively nor do they know the suppliers or the customers to these businesses so there is no way they can do as good a job as the local banks can. Who wants to dump taxpayer funds down a waste hole with fraud and high loan losses which would inevitably come with the SBA lending directly"
Patrick C. Conway, President and CEO of CrossState Credit Union Association: "CrossState Credit Union Association supports Rep. Luetkmeyer’s legislation, H.R. 6037, that would prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) loan program. As an association, CrossState represents 490 credit unions with over 4.1 million members in NJ and PA. Since inception, the SBA 7(a) program has proven to be an extremely successful public/private partnership helping to serve small businesses and the underserved. In similar fashion, the credit union mission is to serve member needs, particularly those of modest means, both as consumers and as small business owners. Allowing credit unions and other financial institutions to serve members directly provides consumers and small businesses with direct entry into the mainstream financial services marketplace. As direct lenders, our credit unions see no benefit adding the SBA, a federal agency, as a direct-to-consumer/small business lender. Clearly, we are united in purpose and we believe that small businesses are best served when the SBA works directly with established lenders in the marketplace, like credit unions, to provide small business financing for all American small businesses.”
Rebeca Romero Rainey, President and CEO of the Independent Community Bankers of America: "The SBA has a poor track record in direct lending. The last time the agency engaged in direct lending in the 1990s, subsidy rates were found to be '10 to 15 times' higher than for its loan guarantee program, according to a recent Congressional Research Service report. The recent Economic Injury Disaster Loan (EIDL) program, an SBA direct loan program, has been rife with fraud and poorly executed. SBA direct lending is a poor and costly alternative to private sector lending and would reach fewer borrowers. Today, there is a strong network of community banks, Community Development Financial Institutions, and other lenders already in place to meet demand for small business borrowers."
Richard J. Baier, President and CEO of the Nebraska Bankers Association: "Loans to small businesses are a primary function of Nebraska’s hometown banks. Nebraska banks know their customers and understand their businesses. Nebraska banks have invested thousands of dollars to develop tools and security protocols to enhance lending and banking relationships for small business. Congressional proposals to expand the Small Business Administration’s direct lending under the 7(a) program are a solution in search of a problem. It also exposes the federal government to unnecessary financial risk and increases the chance of financial fraud and abuse. Through the Paycheck Protection Program process, Nebraska banks demonstrated their ability to meet the needs of their small business customers efficiently and effectively. The SBA should not be in the direct lending business!"
Richard D. Gumbrecht, Chief Executive Officer of the Secured Finance Network: "We wish to add our strong support for H.R. 6037, your legislation that would prohibit the SBA Administrator from directly making loans under the 7(a) loan program. We are opposed to the provisions of the Build Back Better legislation which allow the SBA to make direct loans to small businesses where there is a vibrant private sector willing to make such advances and at market rates. We see this as a wasteful and unnecessary over-reach that competes directly with available free market sources of capital."
Richard Hunt, President and CEO of the Consumer Bankers Association: "As seen with the Economic Injury Disaster Loan (EIDL) program during the pandemic, fraud within an SBA direct lending program can be widespread. According to a recent analysis by the SBA Office of Inspector General, there have been $79 billion in potentially fraudulent EIDL loans processed and advanced. Compare this to the PPP, where only $4.6 billion in potential fraud was identified, - mostly originated by non-bank lenders - it is apparent the underwriting our member banks provided was key in minimizing fraud. With billions of taxpayer funds already jeopardized though EIDL, we question the need for this expansion of direct 7(a) lending."
Rose Oswald Poels, President and CEO of the Wisconsin Bankers Association: "The Wisconsin Bankers Association (WBA) is very grateful to Rep. Luetkemeyer for leading the introduction of H.R. 6037, as the banking industry already does a great job of filling the lending needs of small businesses across the country. This was evident in the critical role banks played over the last two years in distributing needed PPP funds to small businesses harmed by the pandemic. There is no demonstrated need for the SBA to take-over the role banks are already satisfying when it comes to small business lending. Statistics over the last two years are skewed due to the pandemic when demand for direct lending by small businesses sharply declined due to stimulus funding and PPP loans. WBA supports H.R. 6037 and appreciates Rep. Luetkemeyer’s leadership in moving this important legislation forward."
WASHINGTON, D.C. - On November 18, 2021, House Committee on Small Business Ranking Member Blaine Luetkemeyer introduced H.R. 6037, legislation to prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) loan program. All Committee Republicans cosponsored this legislation.
This legislation would prohibit the SBA Administrator from directly making loans under the 7(a) loan program. The Democrats continue to push for massive government expansion, including the direct lending option under the 7(a) loan program. This is foreshadowing a movement away from private sector lenders having a role within these programs toward a sole government lending option.
This is troublesome as the private sector delivers specific efficiencies through competition that the government cannot. Additionally, private sector lenders provide robust protections against fraudulent activity due to numerous federal financial rules and regulations. The government should not be in the business of making direct loans.
In response, numerous lending and small business associations have come forward in support of Ranking Member Luetkemeyer's bill, H.R. 6037.
The link to the H.R. 6037 bill text can be found here.
What They Are Saying:
Alejandro M. Sanchez, President and CEO of the Florida Bankers Association: "On behalf of Florida's community, regional and larger banks, I am writing in support of your legislation, H.R. 6037, to prohibit the Administrator of the Small Business Administration (SBA) from directly making loans under the 7(a) Loan Program. The SBA 7(a) program just had a record year for the amount of loans approved to aid small businesses. Creating a direct lending program is inappropriate and not necessary. Prior to the COVID-19 pandemic, Florida Bankers Association (FBA) member banks were some of the most active 7(a) lenders in the country, facilitating SBA-backed loans of all sizes."
Alfredo Ortiz, President and CEO of the Job Creators Network: "Ranking Member Luetkemeyer continues to defend small businesses from the war on small businesses being waged by President Biden and Congressional Democrats. His legislation to prohibit the Small Business Association from direct lending in the 7(a) Loan Program will protect small business access to credit when it’s needed most. Democrats want a government takeover of small business loans and will use the SBA as a vehicle to achieve this goal unless stopped. Rep. Luetkemeyer’s legislation will ensure continued access to credit from efficient and fast-moving private-sector lenders whom small businesses depend on for their loans. As small businesses bring the economy back from the pandemic-induced recession, robust access to these longstanding credit sources is vital. On behalf of American small business owners, JCN commends Rep. Luetkemeyer from protecting this lifeblood of the small business economy.”
Brad Thaler, Vice President of Legislative Affairs of the National Association of Federally-Insured Credit Unions: "We share your concern that the government does not belong in the business of making loans, and historically has been unsuccessful at lending. We agree that the 7(a) program is important for small businesses and we thank you for your leadership in introducing this timely legislation to protect the integrity of the program. NAFCU recognizes the need for more small business loans, however, we believe that there are better ways to work with existing lenders to address the stated need of access to smaller loans to small businesses and we stand ready to work with you to achieve that goal."
Chris Furlow, President and CEO of the Texas Bankers Association, the nation’s oldest and largest state banking organization: "If the goal is to speed and expand access to capital, enabling direct loans from the government will be counter-productive. We firmly believe this ill-conceived effort would result in billions of dollars in nonperforming loans, that would be more in line as a grant program. The SBA has shown its value in its partnership with community banks throughout its history. Congress must pass Ranking Member Luetkemeyer’s bill that will prohibit SBA from essentially replacing effective private sector lending capabilities with more bureaucracy and they should strengthen the 7(a) program rather than compete with it.”
David Caris, CEO of the Community Bankers of Iowa: "The federal government should not be competing head to head with community banks to offer direct loans from the SBA! We’ve seen this movie before with the Farm Credit System currently loaning directly to affluent farmers, which was not the original intent. If this gets started, regardless of initial limits, the federal government will eventually drive community banks out of business since the SBA doesn’t pay taxes and community banks do."
Doug Wareham, President and CEO of the Kansas Bankers Association: “The Kansas Bankers Association (KBA) strongly supports H.R. 6037, which would prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) Loan Program. Through the years, Kansas banks and local SBA offices have developed partnerships which have successfully served the needs of businesses of all sizes. This public/private partnership works because each party has specific time-tested expertise that is utilized during the life of the transaction. To expect the SBA to understand the complexities of loan underwriting in such a short period of time and without the regulatory safeguards that exist for banks, as prescribed by the Build Back Better proposal, would not be in the best interest of small businesses, private-sector lenders and the American taxpayer. We applaud Congressman Luetkemeyer for introducing H.R. 6037.”
Edward J. Hill, Senior Vice President and Head of Government Relations of the Bank Policy Institute: "The Bank Policy Institute is sending this letter in support of HR 6037, a bill to prohibit the Small Business Administration from making loans directly under the 7(a) loan program. This legislation recognizes and helps preserve the important relationships between small businesses and their banks...In summary, the SBA partnership with banks has been strong, effective, and successful. A program that substitutes private sector expertise, technology investments and customer service capabilities with government inefficiency would result in a worse experience for small business customers and greater costs for taxpayers."
Gordon Fellows, President and CEO of the Mississippi Bankers Association: "PPP taught us all many lessons, and one important point we should all remember going forward is how effectively local banks and the government can work together, not against each other, to support small businesses. Creating new government-advantaged competition will deprive businesses of the local expertise and support that a banker would give them and will create new risks for taxpayers. Both seem like poor ideas to Mississippi banks. Small businesses would be better served by the SBA working to expand the number of banks and other private lenders that participate in 7(a) and reduce loan application wait times for participating lenders – the long wait times are often cited as the biggest impediment to 7(a) participation."
James C. Ballentine, Executive Vice President of Congressional Relations and Political Affairs of the American Bankers Association: "On behalf of the American Bankers Association (ABA), I am writing in support of H.R. 6037, legislation to prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) loan program. As you know, ABA member banks have a strong partnership with the SBA and work closely with the agency to provide financing to small businesses across the country through existing SBA programs. We believe that public-private partnership, especially bank participation in the successful 7(a) program and the more recent Paycheck Protection Program, has provided much-needed financial support to the nation’s small businesses."
Jeff W. Dick, Chairman and CEO of MainStreet Bancshares, Inc. and MainStreet Bank: "I am writing today to support the passage of H.R. 6037, which would prohibit the administrator of the Small Business Administration from directly making loans under the 7(a) loan program. Small business lending is based upon a strong relationship between the borrower and the lender. Among other things, the lender needs to be present in good times and in bad times, to work with the borrower so that he/she can be successful. Anyone who has worked with the SBA under various programs knows that the rules are interpreted as black or white. Business generally runs amidst shades of gray. Please support the expeditious passage of H.R. 6037.”
Jim Amundson, President and CEO of the Independent Community Bankers of Minnesota: "The Independent Community Bankers of Minnesota (ICBM) proudly represents nearly 200 community banks in Minnesota. We strongly support Ranking Member Luetkemeyer’s bill (H.R. 6037) which would prohibit the Small Business Administration from making direct loans under the 7(a) programs...Ultimately, the SBA has a poor track record in direct lending and any new attempts to do so promise to be less effective and more costly than private lenders. The 7(a) program has been successful because community banks and the SBA have worked together, and each party plays an important role. Community banks rely on their local knowledge of their markets and economies and the SBA provides important support for borrower’s who might not otherwise receive the capital they need. Because of this, the Independent Community Bankers of Minnesota strongly oppose any attempt to cut community banks out of the SBA 7(a) loan program.”
Jim Nussle, President and CEO of the Credit Union National Association: "This public private partnership works as borrowers can obtain loans from financial institutions that they know well and that have vested interests in their borrowers’ success. Furthermore, when working with local lenders, small businesses are likely to benefit from guidance and experience from a lender with a stake in helping the borrowing business succeed. By becoming a direct lender to small businesses, the SBA is likely to harm local financial institutions’ relationships with businesses and possibly hamper these businesses from establishing important banking relationships that can only help their business survive and flourish. As such, we strongly support your legislation and other efforts to prevent SBA direct lending."
John McNair, President and CEO of the Community Bankers Association of Georgia: "The Community Bankers Association of Georgia is appreciative and supportive of Rep. Luetkemeyer’s efforts and stands behind the ICBA letter of support.”
Karen Kerrigan, President and CEO of the Small Business and Entrepreneurship Council: "Emergency lending by the SBA in times of crisis is warranted at times, but direct lending would result in unintended fallout for taxpayers, small businesses and the community financial institutions that local businesses depend upon. Direct lending by the SBA is a bad idea. SBE Council fully supports Ranking Member Luetkemeyer and his colleagues in their work to advance legislation that prevents it from happening."
Kevin L. Shivers, CEA, President, and CEO of the Pennsylvania Association of Community Bankers: “Community Banks responded quickly to the pandemic, delivering billions of dollars in PPP lifelines to American small businesses. The US Small Business Administration was an important ally in this process. But the agency alone lacks the resources and the local relationships to effectively meet small-business capital needs. The SBA and the Biden Administration instead should work to expand the number of community banks eligible to serve small businesses through the 7a program.”
Kraig Lounsberry, President of the Community Bankers Association of Illinois: "Community banks are far superior at establishing and prudently underwriting commercial lending relationships. One needs to look no further than the SBA Inspector General Report (Number 20-21) which raised red flags about the SBA’s Economic Injury Disaster Loan (EIDL) program and warned that billions may have been fraudulently directed to or obtained by ineligible businesses. The SBA’s performance in making 7(a) loans will undoubtedly result in similar lapses which will put billions of taxpayer dollars at risk of loss. Thank you again for your leadership on this issue. CBAI will adamantly oppose any attempt to authorize direct 7(a) lending by the SBA and we strongly support your legislation to prohibit such authority."
Max Cook, President and CEO of the Missouri Bankers Association: "On behalf of the Missouri Bankers Association (MBA), I am writing to express our support for your legislation, H.R. 6037, which would prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) Loan Program. The MBA’s members understand the need for capital availability for Missouri’s entrepreneurs and small businesses as those customers are the backbone of our communities and economy. As such, those businesses and their needs are the focus of our work every day. The public-private partnership that the banking community and the SBA have had for decades has and continues to work extremely well. Establishing a direct 7(a) lending program would erode the efficiencies that come from private sector competition as well as the protections from fraud that exist due to existing rules and regulations. We thank Congressman Luetkemeyer for introducing this extremely important legislation and stand ready to help in every way to secure its passage.”
Michael Adelman, President and CEO of the Ohio Bankers League and Evan Kleymeyer, Senior Vice President of Government and External Relations of the Ohio Bankers League: "We have seen time and time again that when the Federal government offers direct lending programs, they directly compete and take business away from banks who reinvest in the communities they serve. Local banks are in the best position to know their communities well enough to both lend to small businesses while meeting the other credit needs of their communities as well as serving their communities in other ways...We share your concern that the government does not belong in the business of making loans, and historically has been unsuccessful at lending. Additionally, we are concerned once this is allowed it will create a slippery slope where Congress can simply increase the threshold for SBA direct lending forcing all loans to go directly through the SBA."
Michael J. Tierney, President and CEO of the Community Bankers of Michigan: "We are thrilled Representative Luetkemeyer is on the case. Community banks have been great partners with the SBA in the PPP program, the 7a program, and the 504 program and the banks should be the ones making the credit decisions. When you move credit decision making further from the customer and the community – you get fraud like what happened with fintech’s in the PPP program. Lessons learned should not be forgotten and having banks lend directly to small businesses in their communities is the best solution for all parties. The SBA does not have the resources or the expertise to do direct lending effectively nor do they know the suppliers or the customers to these businesses so there is no way they can do as good a job as the local banks can. Who wants to dump taxpayer funds down a waste hole with fraud and high loan losses which would inevitably come with the SBA lending directly"
Patrick C. Conway, President and CEO of CrossState Credit Union Association: "CrossState Credit Union Association supports Rep. Luetkmeyer’s legislation, H.R. 6037, that would prohibit the Small Business Administration (SBA) from directly making loans under the 7(a) loan program. As an association, CrossState represents 490 credit unions with over 4.1 million members in NJ and PA. Since inception, the SBA 7(a) program has proven to be an extremely successful public/private partnership helping to serve small businesses and the underserved. In similar fashion, the credit union mission is to serve member needs, particularly those of modest means, both as consumers and as small business owners. Allowing credit unions and other financial institutions to serve members directly provides consumers and small businesses with direct entry into the mainstream financial services marketplace. As direct lenders, our credit unions see no benefit adding the SBA, a federal agency, as a direct-to-consumer/small business lender. Clearly, we are united in purpose and we believe that small businesses are best served when the SBA works directly with established lenders in the marketplace, like credit unions, to provide small business financing for all American small businesses.”
Rebeca Romero Rainey, President and CEO of the Independent Community Bankers of America: "The SBA has a poor track record in direct lending. The last time the agency engaged in direct lending in the 1990s, subsidy rates were found to be '10 to 15 times' higher than for its loan guarantee program, according to a recent Congressional Research Service report. The recent Economic Injury Disaster Loan (EIDL) program, an SBA direct loan program, has been rife with fraud and poorly executed. SBA direct lending is a poor and costly alternative to private sector lending and would reach fewer borrowers. Today, there is a strong network of community banks, Community Development Financial Institutions, and other lenders already in place to meet demand for small business borrowers."
Richard J. Baier, President and CEO of the Nebraska Bankers Association: "Loans to small businesses are a primary function of Nebraska’s hometown banks. Nebraska banks know their customers and understand their businesses. Nebraska banks have invested thousands of dollars to develop tools and security protocols to enhance lending and banking relationships for small business. Congressional proposals to expand the Small Business Administration’s direct lending under the 7(a) program are a solution in search of a problem. It also exposes the federal government to unnecessary financial risk and increases the chance of financial fraud and abuse. Through the Paycheck Protection Program process, Nebraska banks demonstrated their ability to meet the needs of their small business customers efficiently and effectively. The SBA should not be in the direct lending business!"
Richard D. Gumbrecht, Chief Executive Officer of the Secured Finance Network: "We wish to add our strong support for H.R. 6037, your legislation that would prohibit the SBA Administrator from directly making loans under the 7(a) loan program. We are opposed to the provisions of the Build Back Better legislation which allow the SBA to make direct loans to small businesses where there is a vibrant private sector willing to make such advances and at market rates. We see this as a wasteful and unnecessary over-reach that competes directly with available free market sources of capital."
Richard Hunt, President and CEO of the Consumer Bankers Association: "As seen with the Economic Injury Disaster Loan (EIDL) program during the pandemic, fraud within an SBA direct lending program can be widespread. According to a recent analysis by the SBA Office of Inspector General, there have been $79 billion in potentially fraudulent EIDL loans processed and advanced. Compare this to the PPP, where only $4.6 billion in potential fraud was identified, - mostly originated by non-bank lenders - it is apparent the underwriting our member banks provided was key in minimizing fraud. With billions of taxpayer funds already jeopardized though EIDL, we question the need for this expansion of direct 7(a) lending."
Rose Oswald Poels, President and CEO of the Wisconsin Bankers Association: "The Wisconsin Bankers Association (WBA) is very grateful to Rep. Luetkemeyer for leading the introduction of H.R. 6037, as the banking industry already does a great job of filling the lending needs of small businesses across the country. This was evident in the critical role banks played over the last two years in distributing needed PPP funds to small businesses harmed by the pandemic. There is no demonstrated need for the SBA to take-over the role banks are already satisfying when it comes to small business lending. Statistics over the last two years are skewed due to the pandemic when demand for direct lending by small businesses sharply declined due to stimulus funding and PPP loans. WBA supports H.R. 6037 and appreciates Rep. Luetkemeyer’s leadership in moving this important legislation forward."