WASHINGTON — Long-standing discord between the House and Senate small-business committees boiled over on Wednesday, with the Small Business Administration caught in the middle.
House Small Business Committee Chairman Nydia Velazquez, D-N.Y., criticized a new guarantee program the SBA announced last week to help auto dealers find financing for their inventories. The program was started in part at the behest of Senate lawmakers.
In a letter sent Tuesday to SBA Administrator Karen Mills, Velazquez said the program to make loans to dealers, known as floor plan financing, would reach only a few businesses and was too risky.
In implementing it, Velazquez argued, the SBA had neglected to address programs it was tasked to create from the stimulus package.
She wrote that "50% of the agency's responsibilities on the American Recovery and Reinvestment Act remain unimplemented. These provisions were due to be completed over 100 days ago."
Velazquez's objections caught Senate lawmakers and SBA officials off guard.
"The concerns that she has are surprising," said Jonathan Swain, the SBA's assistant administrator for communications, "after we implement a program that we'd been asked to do, by members of Congress, by auto dealers and a program that had strong support from the White House."
Swain said the SBA was implementing the stimulus provisions as quickly as possible.
"On June 15, we will have implemented $645 million out of the $730 million we were allocated in the Recovery Act," he said.
The push for an SBA guarantee on floor plan financing came from several sources, but included several members of the Senate Committee on Small Business.
Sen. Olympia Snowe, R-Maine, the committee's ranking member, and Jeanne Shaheen, D-N.H., wrote to Mills in early April, just after she was confirmed, requesting that the SBA consider guaranteeing floor plan loans.
Asked about the issue on Wednesday, Shaheen said the program was still important.
"Given the particularly difficult challenges facing our auto industry, the SBA's temporary program will help dealers that are small businesses stay afloat," Shaheen said in a statement to American Banker.
In response to Velazquez's letter, a spokesman for the Senate committee's chairman, Sen. Mary Landrieu, D-La., said: "Senator Landrieu supports the SBA's floor plan financing pilot program. This is the type of new approach that will free up capital for small businesses so they can help lead the nation out of the economic recession."
But James Ballentine, the American Bankers Association's director of housing, community and economic development, said Velazquez raises legitimate concerns, especially for an agency that "has seen a sizable reduction in staff and has more responsibility than ever before."
"There's been some concern about stretching the loan programs of the SBA beyond their existing system," Ballentine said. "This is a new avenue that they're going down with this auto financing. The committee may have met with lenders that expressed concern about it."
Velazquez's letter may also be a move to reassert primacy over issues related to the SBA in anticipation of a hearing scheduled for next week on the SBA's loan programs.
The hearing will be the first of a series of three.
At the June 10 hearing, representatives from the ABA and the National Association of Development Companies, a trade group that focuses on the SBA 504 loan program, will testify.
The ABA's testimony will focus on complaints from lenders that the SBA is slow to approve claims on the guaranteed portion of a defaulted SBA loan.
"They have stretched banks out for a year or more and by that time, you're essentially paying — the loan is sitting there on your books, dormant, and you have nothing," Ballentine said.
Swain said the approval time for guarantee claim applications is "certainly an improvement, historically, over what it has been in the past."
"There are some specific actions we've taken — it takes under 30 days on average to process and complete applications now," he said.
