WASHINGTON — For the first time in nine years, Congress is poised to pass a bill reauthorizing the Small Business Administration, but different approaches by the House and Senate could still undercut the effort.
Bankers support the formal reauthorization, arguing that the series of temporary extensions passed by Congress since 2000 have made it difficult to adopt long-term small-business lending strategies.
Odds of enactment have increased this year in part because the reauthorization is likely to be attached to broader legislation raising SBA lending limits and streamlining the process for loan approvals and guarantee reimbursements.
"If there's any year for it to happen, the stars are aligned this year," said James Ballentine, the senior vice president for political operations at the American Bankers Association. "You have both an eager House and an eager Senate, and based on what the administration has done to date, a very eager administration that not only wants to help small businesses, but also help the Small Business Administration."
And it's not only bankers pressing Congress for action.
"We are working this bill harder than we've ever worked an SBA lending bill in the past," said David French, the vice president for government affairs at the International Franchise Association. "The deterioration in the credit markets has hit our members so severely that they no longer see SBA programs as lender-of-last-resort programs. They are now much more important to our members."
But with congressional adjournment looming, the reauthorization faces an uphill fight, in part because the House and Senate are taking different approaches.
Both chambers have voted to extend the SBA's programs for up to six months, but they have not been able to agree on a longer-term reauthorization, which typically gives an agency authority to continue its programs for three years. The SBA has not been formally reauthorized by Congress since 2000. Under the Bush administration and Republican-controlled Congress, the SBA was not considered a priority. But since Democrats came into power and the financial crisis hit, the SBA has been seen as a key way to get more credit to small businesses.
Last week, the House Small Business Committee approved legislation, sponsored by Chairman Nydia Velazquez, that would reauthorize SBA programs for two years and extend by a year some provisions from the massive government stimulus package adopted in February. Those provisions include an increase in the government guarantee behind SBA loans to 90% from 75%, and an increase in loan limits for the SBA's 7(a) and 504 programs to $3 million.
Though the banking industry supports the bill, it wants changes.
For instance, under one provision the only entities that could participate in SBA lending programs would be those whose "primary mission" is the "financing or development of small-business concerns." The bill also would prohibit participation by any banks that "significantly participate in activities unrelated to the primary mission."
Tony Wilkinson, the president of the National Association of Government Guaranteed Lenders, estimated that would shut out 95% of current SBA lenders.
"That pretty well eliminates most lenders from participating," he said. "There are just so very few folks that are just single-purpose small-business lenders. You'd basically get it down to the 14 small-business companies and a handful of lenders."
A spokesman for the House Small Business Committee disputed that assessment, and a committee report on the bill said it "does not intend for this language to make any material change to the entities that currently participate in these programs."
Lenders are objecting to other parts of the House bill as well.
The increase in the loan size limit, for instance, would change the maximum loan amount that lenders making SBA 7(a) loans could make to $3 million from $2 million, but it would not provide a commensurate increase in the dollar amount of a loan that can be guaranteed.
The House is scheduled to vote on the bill Thursday.
On the Senate side, no bill has yet emerged from the Small Business Committee, but Chairman Mary Landrieu is clearly leaning toward a different approach.
A spokeswoman for the panel said an increase in loan limits may need to be pursued separately from full reauthorization.
Also in the offing are higher loan limits, including an increase to $5 million for the 7(a) program as well as an increase in the government's guarantees.
Congress is also weighing giving the SBA more money.
In July, the appropriations committees in the House and Senate both voted to increase the SBA's budget. The Senate raised the agency's core funding by more than $150 million from the previous year, to $697 million. Money from the stimulus package also swelled the agency's programs — and its responsibilities.
"These are extremely tight budget times — the SBA has seen an infusion of cash this past year unlike they've seen in any time before," Ballentine said. "What needs to be discussed related to SBA … is the capacity of the staff to handle the increased workload and new programs that have been created this year."