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
October 20, 2004

CONTACT: Kate Davis, Allyson Ivins, (202) 225-4038

Small Business Loans Plummet
Republicans' inaction leaves small business in the lurch

WASHINGTON - Small businesses across the country are beginning to feel the effects of the Republican-led Congress leaving town earlier this month without providing a fix for the Small Business Administration's (SBA) flagship 7(a) loan program. As a result of these inactions, small business loans have dramatically fallen. Congresswoman Nydia Velázquez, Ranking Democrat on the House Small Business Committee blamed this inaction for creating one of the toughest lending environments for small firms in over a decade.

The drop is due to the fact that at the behest of the Bush administration, Congressional Republicans allowed key portions of the 7(a) program's funding mechanism to lapse. Those failures to act have resulted in increased upfront fees for small businesses, which in many cases have doubled, resulting in an approximate $1,500 to $3,000 additional cost - as well as contributing to higher loan payments. Congresswoman Velázquez stated, "this Republican Congress should be ashamed of itself to skip town without fixing the mess they created. Now on top of already skyrocketing health care and energy costs, this nation's entrepreneurs will now also face higher access to capital costs."

If the current system remains in place, small businesses and lenders will be overcharged by the federal government by nearly $80 million dollars. This is in addition to the $1.2 billion they have already overpaid during the last decade. Congresswoman Velázquez referred to this as, "nothing more than an additional tax on small businesses."

Democrats attempted on two different occasions to find a solution. The first occurred during consideration of the resolution that extended government operations. The proposal to include a fix for the 7(a) program was offered by David Obey, Ranking Democrat on the House Appropriations Committee. However, this move was rejected along a mostly party line vote. Democrats' final attempt came during the conference on the final spending bill that was under consideration days before Congress adjourned, but was also turned down. Congresswoman Velázquez denounced these refusals, "the fact that bipartisan solutions were offered and rejected, speaks volumes about this administration's commitment to small business. This is just one more example of the president's rhetoric not matching the reality of these policies."

The increased costs are the most recent blows by Republicans to undermine the country's largest small business lending program. This year began with the administration shutting down the program because they had requested insufficient funds. The program was reopened, but with severe limitations on loan size. Republicans stalled in removing the caps for nearly three months. Only after Democrats rallied support did Congress act to pass a short-term fix to reopen the program. During July, Congressional Republican leaders led efforts opposing the funding of the 7(a) program, and instead advocated for an increase in cost on small business owners that receive loans. These latest moves, in addition to higher costs, also blocked the ability of lenders to make use of a $1.5 million loan guarantee, and to apply SBA loans as a part of a larger financing package. Congresswoman Velázquez called this, "a systematic campaign by Republicans to dismantle the 7(a) program," and said that she and her Democratic colleagues would fight to stop that from happening.

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