Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Mr. LEVIN. Mr. President, today I am introducing the Small Business Intermediary Lending Program Act of 2014.

This bill would make permanent a successful small business financing program which provides startups and growing small businesses with access to capital. As a long-time member of the Small Business and Entrepreneurship Committee, I have been a strong supporter of efforts to help small firms expand and thrive so they can create jobs and grow the economy.

The need for creative and effective ways to expand access to capital for small businesses is greater than ever. According to a study issued by the Brookings Institute in May, entrepreneurship is experiencing a troubling decline in the United States, a trend the authors document over the last 30 years, across all 50 States and almost all metropolitan areas. They conclude that we need to pursue policies that better foster entrepreneurship if we want to create more jobs.

One way we can foster entrepreneurship and address the lingering unemployment affecting so many of our communities is to make permanent the Small Business Intermediary Lending Pilot Program.

I proposed and helped enact the Intermediary Lending Pilot Program into law in 2010. Over the last three years, the program has provided loans of $1 million to nonprofit intermediary lenders to make small to mid-sized loans to small businesses. The program gets financing to small businesses that are not being served by banks or conventional loan programs currently available through the Small Business Administration. Small businesses seeking this flexible debt financing may have graduated from the Small Business Administration's Microloan Program, and for a variety of reasons, especially lack of adequate collateral, do not qualify for guaranteed 7(a) loans or other private capital.

Given the slow economic recovery, high demand exists for the Intermediary Lending Pilot Program. In the short life of the program, intermediaries in 20 States across the country have already made more than 300 small business loans, totaling more than $26 million. If not for the Intermediary Lending Pilot Program, the small businesses receiving these loans would have been hard-pressed to find this financing elsewhere. Almost 90 percent of the loans were in the $50,000-$200,000 range, making these loans larger than microloans. The average loan size in the pilot has been about $88,000.

The loans facilitated by the Intermediary Lending Program have done more than help small businesses; they have created or retained thousands of jobs. Building on this success and keeping the program going will strengthen our economy, get small businesses sorely-needed capital, and catalyze job creation.

Merit Hall, a full service staffing firm located in downtown Detroit, provides services and staffing to construction, landscape and facility maintenance contractors throughout southeastern Michigan. In 2013, Merit Hall received a $200,000 ILP loan to support the company's growth. Merit Hall used those funds to retain and create 10 office jobs and 300 jobs in the field. In addition, this loan allowed Merit Hall to grow their revenues to the point where they were bankable and were able to receive a $350,000 loan from a commercial bank and pay off their ILP loan.

Rubber Technologies of Coleman, Michigan, recycles tires to create premium recycled products such as playground surfacing and rubber mats. The Intermediary Lending Program loan they received will help strengthen their business, allowing them to add equipment and retain 12 jobs. Roaming Harvest, a small business in Traverse City, Michigan, started out as a food truck and now thanks to a loan from the Intermediary Pilot program has opened a café featuring local food, retaining two jobs and creating two new jobs.

These small loans can add up. An intermediary lender in the state of Washington, Craft3, has already made 34 loans through the program and created 98 jobs as a result.

Intermediary lenders do more than provide loans; they provide technical assistance and counseling which often does not accompany conventional loans, helping business owners start and grow successful enterprises.

The Intermediary Lending Program is modeled after the U.S. Department of Agriculture's Rural Development Loan Program, which has existed since 1988. Like the USDA program, this SBA counterpart is a decentralized initiative relying on the capacity and market expertise of local, nonprofit intermediary lenders, but it expands this approach, serving both rural and urban areas.

The legislation I am introducing today makes the Intermediary Lending Program permanent and authorizes a funding level of $20 million for each of the next three fiscal years. The legislation authorizes nonprofit lending intermediaries, chosen on a competitive basis, to participate in the program. As in the pilot, each intermediary will receive a loan of up to $1 million at a low interest rate to create a revolving loan fund through which they will make small business loans.

The nonprofit lenders who participate in this program already tap a variety of financing programs to meet the needs of the small businesses in their states and localities. SBA has observed that one of the benefits of the Intermediary Lending Program as compared to the Microloan Program is the longer repayment term, 20 years versus 10 years, respectively. This patient capital helps to facilitate larger loans that some businesses need, up to $200,000, and it allows the revolving loan fund to revolve about 2.5 times before the intermediary fully repays the initial SBA loan.

In addition to authorizing the program, this bill makes a technical correction to the language of the pilot program. While the pilot program limited the amount that an intermediary can borrow under the Intermediary Lending Program to $1 million, it did not intend to take into account money an intermediary borrowed through other SBA programs. Unfortunately, SBA interpreted the language in a way that placed an overall cap on how much a participating intermediary can borrow from the SBA under all SBA programs. The result was that more experienced lenders with higher loan volumes, especially many strong microlenders, were unable to participate. That was simply not the intent of Congress. Rather, this program was designed to complement the microloan and 7(a) programs and add another tool to the portfolio of nonprofit community-based lenders. The bill I am introducing today changes the language to clarify our intent, maintains the $1 million loan limit, and increases the overall amount intermediaries can have outstanding from SBA under the Intermediary Lending Program to $5 million.

The Intermediary Lending Program is a small program which has already made a big difference. It is modeled on a program which has been operating successfully for almost 30 years, and it shields the government from any risks involved in lending to small businesses by having experienced intermediaries take on that risk. As we all look for ways to bolster our economy, we should build on this record of success. The Intermediary Lending Pilot is addressing a lending gap and helping create jobs across the nation. If we adopt my legislation, this program will continue to be an engine for small business growth. I urge its swift enactment.

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