News From Congresswoman
Nydia M. Velázquez
Representing New York's 12th Congressional District - Brooklyn, Manhattan, Queens
Ranking Democratic Member, House Small Business Committee

For Immediate Release
January14, 2004

Contact: Wendy Belzer, Kate Davis(202) 225-2361

Democrats Demand Investigation of Small Business Loan Program Shutdown
Velazquez calls for congressional hearing to determine the causes of recent crisis

WASHINGTON - Congresswoman Nydia M. Velázquez (D-N.Y.), Ranking Member of the House Small Business Committee, along with her Democratic colleagues today demanded an investigation of the shutdown of the Small Business Administration's (SBA) most popular loan program, calling on the Chairman of the House Small Business Committee, Rep. Don Manzullo, to convene a hearing on this issue as soon as Congress commences next week.

"This crisis, which may cost the economy billions of dollars in lost business investment and slow the creation of new jobs, requires our Committee's immediate attention," Congresswoman Velázquez and Committee Democrats wrote in a letter to Chairman Manzullo. "Instead of engaging the small business community and attempting to determine the reasons for the increased demand for 7(a) loans, the Bush administration's response to inquiries by the Committee has been incoherent, failing to offer a cogent analysis of the situation or a proposal for solving this recurring problem."

The SBA announced the 7(a) loan program would resume today after being closed for a week, but with a cap in place of $750,000. In addition to this limitation, the SBA is taking the extraordinary step of prohibiting 7(a) loans to be part of larger financing packages. This practice, called "piggy backing," eliminates another important financing option for small businesses. Together, these changes jeopardize over one-third of all SBA 7(a) loans, and leave many small firms unable to secure the capital they need to start-up and grow. The SBA also failed to address the inequities suffered by the many small businesses that had their loan applications returned or cancelled by the agency. Congresswoman Velázquez called this solution "inadequate," as it fails to "address the long-term problems with the program and will more than likely result in the program shutting down almost immediately after reopening."

"Given the administration's repeated attempts to shirk its responsibility of providing capital to entrepreneurs, the Committee should convene a hearing to understand why and how it continually underestimated 7(a) loan volume and how this miscalculation has affected our nation's small businesses," Congresswoman Velázquez wrote. "As a result of this hearing, it is our hope that a solution can be agreed upon that will ensure the 7(a) loan program fulfills it mission in the future. Finally, the Committee must investigate how the decision to cancel pending 7(a) loan applications will impact small businesses, as many of them will undoubtedly struggle to stay afloat without the benefit of an SBA loan."

"This is perhaps the most fiscally irresponsible move I have ever seen by the Bush administration," Congresswoman Velázquez said. "A hearing is the only means by which we can shed light on this fiasco and begin to right the wrongs this administration has inflicted on our nation's entrepreneurs."

The shutdown ultimately has its roots in the administration's budget request for FY 2004, which only provided a loan level of $9.3 billion, even though Congressional testimony showed a projected demand of $12.5 billion.

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