GOP senators seek hefty boost to small-business relief plan

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Republican leaders in the Senate are finalizing a plan to provide $300 billion for small businesses to meet immediate financial obligations.

Sen. Marco Rubio of Florida, chairman of the Senate Committee on Small Business and Entrepreneurship, said the proposal would enlist banks, credit unions and other lenders that participate in the Small Business Administration’s 7(a) loan program to distribute the funds.

The goal is to transfer enough money to let small businesses make payroll and other operating payments over the next six weeks, Rubio said during a Capitol Hill press conference.

“The idea is to basically use the banking industry, in general, those who are approved to [lend] through the 7(a) program and any other financial institutions who the Treasury Department allows to participate,” he added.

Sen. Susan Collins, R-Maine, is championing a bigger SBA package to help small businesses make payroll obligations.

The latest proposal provides for federally backed loans that would eventually convert to grants, as long as they are used only for payroll and regular operations.

“At the end of a period of time, probably around six or eight weeks, the loan could be forgiven if it has been used to sustain workers,” said Sen. Susan Collins, R-Maine, the plan’s other lead architect.

“It is intended to ensure that employees can make it through this period, that the small business can make it through this period, and when this crisis passes that they can unite and we’ll still have vibrant Main Street businesses employing millions of Americans,” Collins added. “That’s the concept we’re working hard on.”

Neither Collins nor Rubio could provide specifics as to how the loan-to-grant conversion would work. Rubio said those details are still being hammered out.

“We don’t have a document to hand you yet, because there’re some fine details we’re working out, but we’re very confident we’re going to have a proposal … we hope can gain wide bipartisan approval,” Rubio said.

Wednesday’s proposal builds on one Rubio introduced a week ago that would use the 7(a) program to funnel $50 billion in government-guaranteed loans to small businesses. Rapidly worsening economic conditions around the country, especially for the hospitality industry, spurred a bigger response, Rubio said.

“Many of these proposals build on the core of a proposal we had been already been working on with” Democratic lawmakers, Rubio said. “The biggest difference between this proposal and a week ago is that one was $50 billion, just to show you how fast this is moving and the magnitude of it.”

Rubio’s original proposal, which remains under consideration, provides SBA funding, while waiving 7(a)’s upfront guarantee fee and the annual fee borrowers pay while loans are outstanding. It would also increase the program’s typical guarantee from 75% to 90% and increase the maximum amount for streamlined Express loans from $350,000 to $1 million.

As with the new proposal, the original plan permits borrowers to use funds for payroll support, including payments for sick, medical or family leave.

Separately, Nydia Velazquez, D-N.Y., chairman of the House Small Business Committee, introduced a bill last week that offered 10-year, no-interest loans for up to $2.5 million that the SBA would make directly through its disaster-relief arm.

Velazquez also played a leading role in securing passage earlier this month of the only small-business emergency effort currently in operation, a $7 billion package that offers economic injury disaster-relief loans of up to $2 million.

Velazquez on Wednesday signaled support for a broader effort, particularly if it allows small-business employees to receive paychecks.

“The government has a responsibility to ensure employers and workers have the peace of mind that this emergency will not sink them into economic turmoil,” she said in a press release.

“We understand this is a time the federal government must be innovative,” she added. “We have not taken any option off the table, including the possibilities of loan payment waivers, zero-interest loans, grants, SBA direct loans and the creation of a Treasury fund to put cash in the pockets of small businesses without delay.”

Private-sector lenders have advocated for a major role in the SBA’s response since the coronavirus crisis began, and that seems to be the case still, even as the potential cost has ballooned.

A number of bankers, as well as the Independent Community Bankers of America and the American Bankers Association, backed Rubio’s original plan. None have expressed any opposition to the larger effort.

“We’re supportive of keeping credit flowing to small businesses,” said Paul Merski, the ICBA's group executive vice president for congressional relations and strategy, adding that the goal for lawmakers is to see that their proposals are included in what is certain to be a record-breaking stimulus package.

The online lender Kabbage is ready to throw its support behind a plan that employs banks and other lenders to get money in small businesses' coffers as quickly as possible, said Sam Taussig, the company's head of global policy.

Though noting that details of the plan Rubio and Collins outlined are “very unclear,” Taussig called it a good idea.

“We’re looking at a race against the clock here,” Taussig said. “Our message has been that time is of the essence. This is not a one-person-or-the-other policy debate, this is a let’s-throw-everything-against-the-wall and see what works” situation.

In addition to the emergency plan Congress is considering, Kabbage believes small business need more funding through the Economic Injury Disaster Loan Program enacted on March 6. There, too, Kabbage believes private-sector lenders should take the lead.

“We’re asking SBA to open-source,” Taussig said. “Publicly post the standards for EIDL loans and let private lenders and the fintech partners that support them do all the work."

The SBA’s “existing 7(a) partners have the capacity and technology with fintech partners to onboard customers to SBA’s credit criteria, go through fraud checks, prove economic damage has occurred and to disburse funds,” Taussig said. “That infrastructure has already been built and can be retooled in a matter of days to provide small businesses funding in minutes.”

Similarly, Merski said he’s hoping Congress will give lenders as much freedom as possible when it comes to lending decisions.

“Community bankers know how to make loans,” Merski said. “They know borrowers' credit and collateral much better than the SBA.”

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Coronavirus SBA Small business lending Marco Rubio Susan Collins