SMALL BUSINESS FINANCING IMPROVEMENTS ACT OF 2008 -- (House of Representatives - September 27, 2008)
Mr. CHABOT. Mr. Speaker, I yield myself such time as I may consume.
Today I rise in support of H.R. 7175, the Small Business Lending Improvements Act of 2008. I especially would like to thank Chairwoman Velázquez for working in a cooperative and bipartisan manner to bring this important bill to the House floor. Once again, she has done so. She has been working in such a manner for the last 2 years. I commend her for that.
All of us are aware of the recent turmoil in the financial markets. These problems also directly impact America's small businesses. Availability of credit is reduced thereby dampening the capacity of small businesses to create much-needed jobs. Yet it's not just the availability of credit that adversely impacts America's small business owners. These people are also ordinary men and women with the same concerns about the value of their homes, the safety of their investments, the spiking interest rates, and the outlook for the future of their children that every American has to be concerned about in these uncertain times.
The bill before us today will not remedy all of these problems, but it will make important improvements in the capacity of small businesses to obtain needed capital without further adding to the potential problems facing our financial sector.
Although the changes in the bill are modest, they include key components of H.R. 1336 that the House overwhelmingly passed back in 2007. These modifications will increase the availability of credit for small businesses and reduce unnecessary paperwork on lenders without undermining the scrutiny provided by the Small Business Administration of the lenders or borrowers.
Title I makes very modest changes to the operation of the SBA's core 7(a) lending program. Nevertheless, these changes will improve the liquidity in the small business lending market while making the loans available to more small businesses. It's important to note that nothing in title I changes the standards under which the SBA guarantees the issuance of loans or alters the fact that the program operates without any taxpayer subsidy. I want to reiterate that: Operates without any taxpayer subsidy.
I'm most proud of title II of H.R. 7175. It modifies and strengthens the loan program operated pursuant to title V of the Small Business Investment Act of 1958. Certified development companies, or CDCs, are vital to long-term economic and community development in my district and throughout the country. CDCs operate to provide long-term fixed-rate financing for small business concerns who find their financing needs cannot be met due to the loan limits of the 7-day loan program. And unlike many 7-day lenders, CDCs must be locally based so they have a key understanding of the needs of the communities they serve.
The first thing that title II does is change the name of the program. While this may sound minor, it will provide greater recognition to CDCs and enable them to better promote their important mission of local economic development.
Section 202 makes important technical changes to the definitions in the CDC program, including, most importantly, defining the term ``certified development company.'' As a corollary, title II eliminates the outdated term ``qualified state and local development company'' from the Small Business Investment Act of 1958.
In my estimation, section 203 is the most important provision in the bill. It statutorily establishes the procedures by which the SBA designates entities as CDCs. The most important requirements of the statutory procedures is the mandate that the CDC have local board members familiar with the economic development needs of the community. Even though the bill authorizes expansion only into neighboring states, the CDC must have representatives that understand the local economic development needs of the new state of operation.
Another very important aspect of the bill authorizes the CDCs to perform their own liquidations. Under the current process, the SBA performs liquidations and only receives about 20 cents on the dollar, a wholly inadequate return on guarantees issued by the Federal Government.
By having CDCs with their local expertise performing liquidations, the taxpayers will receive a better return on their guarantee, something essential given current conditions in the financial markets.
Title II also makes other changes providing greater financial opportunities for small businesses under the CDC program and enhance local economic development without placing any undue risk on the taxpayer.
Finally, title III of H.R. 7175 makes some technical changes to the operation of the small business investment company program. By making it easier to calculate investment limits, SBICs will be better able to manage their portfolios thereby increasing the overall value of their portfolios without placing the Federal taxpayer at any increased risk.
Together, all of these changes made will spur economic development, which is really one of the key things we need to do at this time.
For these reasons, I ask my colleagues to support passage of this.
I reserve the balance of my time.