Relief Package Stabilizes Small Business Lending Market
While Americans watch as the government bails out the banking giants who created the current credit crunch, Senator John Kerry, Chairman of the Senate Committee on Small Business and Entrepreneurship, is responding with a bail-out package that focuses on Main Street not Wall Street. Kerry introduced today a small business relief bill centered on helping the small businesses that create jobs and aid our local economies.
"If we can spend $700 billion to fix Wall Street, we should be able to help our everyday entrepreneurs who employ half of America's workforce and pump almost a trillion dollars into the economy each year," Kerry said. "These owners are suffering today because of a credit crisis that is preventing them from gaining access to the capital they need to keep running - let alone to expand their firms to compete globally."
A recent federal survey reports that more than 65 percent of U.S. banks have tightened their lending standards for loans to small businesses. Traditionally, the Small Business Administration's (SBA) 7(a) and 504 loan programs - which provide 40 percent of the country's long-term capital to small businesses - have filled the gap left by private lenders. But these programs have become so expensive that owners on Main Street are having trouble accessing them. Loans to small businesses through the 7(a) program are down 30 percent and loans through 504 have dropped 16 percent, costing the economy more than 42,000 jobs.
The Committee's proposals would temporarily eliminate fees charged to the borrowers and lenders who participate in the 7(a) program. Additionally, the bill suspends the lender and servicing fees and increases the maximum loan size for the 504 program. The relief package also would allow a limited amount of refinancing on certain mortgages, make the program's job creation requirement more reasonable and improve and standardize the owner-occupancy requirement. Together these changes would make borrowing more affordable for small businesses while making the programs more cost effective to lenders.
"At the root of this mess is a lack of oversight and severe deregulation of the financial industry, causing turmoil in America the likes of which we have not seen since the Great Depression," Kerry said. "In addition to reducing fees and regulatory burdens on programs that stimulate economic growth and job creation, and improve liquidity for small banks, my proposals also increase lender oversight."
The proposals are similar to ones enacted to enhance lending programs and the economy after 9-11. The changes helped then - pumping over $2 billion into local economies and saving or creating about 77,000 jobs - and they'll certainly help today.
"My changes will fill the gap left by the private sector at a time when our nation's owners and employees on Main Street are wondering why the CEOs who created this crisis are receiving a bailout when they're struggling just to keep their doors open," Kerry said. "It's essential that we bring our economy back to life, but we must do so in a way that doesn't continue to punish America's hardworking entrepreneurs for the sins of Wall Street's titans."