	Small Business Access to Capital

Congressional interest in small business access to capital has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to start, continue, or expand operations and create jobs. Some have argued that the federal government should provide additional resources to assist small businesses. Several laws were enacted during the 111 th Congress to enhance small business access to capital. For example,
P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), provided the Small Business Administration (SBA) an additional $730 million, including $375 million to temporarily subsidize SBA fees and increase the 7(a) loan guaranty program's maximum loan guaranty percentage from 85% on loans of $150,000 or less and 75% on loans exceeding $150,000 to 90% for all regular 7(a) loans. 111-240 , the Small Business Jobs Act of 2010, authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) ($4.0 billion was issued) to encourage community banks with less than $10 billion in assets to increase their lending to small businesses. It also authorized a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs, numerous changes to the SBA's loan guaranty and contracting programs, funding to continue the SBA's fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through December 31, 2010, and about $12 billion in tax relief for small businesses. P.L. 111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue its fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted, which occurred on January 3, 2011. This report focuses on the SBLF. It begins with a discussion of the supply and demand for small business loans. After describing the program's structure, the report then examines other arguments that were presented both for and against the program's enactment. Advocates claimed the SBLF would increase lending to small businesses and, in turn, create jobs. Opponents contended that the SBLF could lose money, lacked sufficient oversight provisions, did not require lenders to increase their lending to small businesses, could serve as a vehicle for the Troubled Asset Relief Program (TARP) recipients to effectively refinance their TARP loans on more favorable terms with little or no resulting benefit for small businesses, and could encourage a failing lender to make even riskier loans to avoid higher dividend payments. The report concludes with an examination of the SBLF's implementation by the Department of the Treasury and a discussion of bills introduced during recent Congresses to amend the SBLF. For example, during the 112 th Congress, S. 681 , the Greater Accountability in the Lending Fund Act of 2011, would have, among other provisions, limited the program's authority to 15 years from enactment and prohibited TARP recipients from participating in the program. 2807 , the Small Business Leg-Up Act of 2011, would have transferred any unobligated and repaid funds from the SBLF when its investment authority expired on September 27, 2011, to the Community Development Financial Institutions Fund "to continue the program of making capital investments in eligible community development financial institutions in order to increase the availability of credit for small businesses." H.R. 3147 , the Small Business Lending Extension Act, would have, among other provisions, extended the Department of the Treasury's investment authority from one year following the date of enactment to two years. 2474 , the Community Lending and Small Business Jobs Act of 2013, would have transferred any unobligated and repaid funds from the SBLF to the Community Development Financial Institutions Fund. P.L. H.R. H.R. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small businesses and create jobs.
Congressional interest in small business access to capital has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to start, continue, or expand operations and create jobs. Some have argued that the federal government should provide additional resources to assist small businesses. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small businesses and create jobs.
Several laws were enacted during the 111th Congress to enhance small business access to capital. For example,
P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), provided the Small Business Administration (SBA) an additional $730 million, including funding to temporarily subsidize SBA fees and increase the 7(a) loan guaranty program's maximum loan guaranty percentage to 90%. P.L. 111-240, the Small Business Jobs Act of 2010, authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF), in which $4.0 billion was issued, to encourage community banks with less than $10 billion in assets to increase their lending to small businesses. It also authorized a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs, numerous changes to the SBA's loan guaranty and contracting programs, funding to continue the SBA's fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through December 31, 2010, and about $12 billion in tax relief for small businesses. P.L. 111-322, the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue its fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted, which occurred on January 3, 2011.
This report focuses on the SBLF. It opens with a discussion of the supply and demand for small business loans. The SBLF's advocates claimed the SBLF was needed to enhance the supply of small business loans. The report then examines other arguments presented both for and against the program. Advocates argued that the SBLF would increase lending to small businesses and, in turn, create jobs. Opponents contended that the SBLF could lose money, lacked sufficient oversight provisions, did not require lenders to increase their lending to small businesses, could serve as a vehicle for Troubled Asset Relief Program (TARP) recipients to effectively refinance their TARP loans on more favorable terms with little or no resulting benefit for small businesses, and could encourage a failing lender to make even riskier loans to avoid higher dividend payments.
The report concludes with an examination of the program's implementation and a discussion of bills introduced to amend the SBLF. For example, during the 112th Congress, S. 681, the Greater Accountability in the Lending Fund Act of 2011, would have limited the program's authority to 15 years from enactment and prohibited TARP recipients from participating in the program. H.R. 2807, the Small Business Leg-Up Act of 2011, would have transferred any unobligated and repaid funds from the SBLF to the Community Development Financial Institutions Fund "to increase the availability of credit for small businesses." H.R. 3147, the Small Business Lending Extension Act, would have extended the Department of the Treasury's investment authority from one year to two years. During the 113th Congress, H.R. 2474, the Community Lending and Small Business Jobs Act of 2013, would have transferred any unobligated and repaid funds from the SBLF to the Community Development Financial Institutions Fund.