"Statement of the Hon. Sharice Davids on Catalyzing Economic Growth through SBA Community-Based Lending"

Summary

A statement by the Hon. Sharice Davids dated March 29, 2022, on Catalyzing Economic Growth through SBA Community-Based Lending. It states that PPP delivered over $800 billion in emergency loans over the life of the program and says access was not equal, with prior relationships with big banks leading to the exclusion of the smallest businesses. The statement recounts that the Committee incorporated set-asides in legislation so community lenders could participate in PPP, and that GAO and outside experts found these changes effective. It names the 504/CDC Loan Program, SBA Microloan Program and Community Advantage Pilot Loan Program as programs delivered by community lenders. It says members of the committee have introduced legislation to bolster these programs and that Davids looks forward to hearing directly from community lenders.

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Full text

Statement of the Hon. Sharice Davids on Catalyzing Economic Growth through SBA Community-Based Lending

March 29, 2022

Tags:

Economic Growth, Tax, and Capital Access

The COVID-19 pandemic highlighted long-standing inequities in the small business lending market. In March of 2020, Congress stepped in to support small businesses through the Paycheck Protection Program. Under PPP, banks and other private lenders made fully guaranteed SBA loans to small businesses hurt by the virus.

Over the life of the program, PPP delivered over $800 billion in emergency loans. This aid helped small businesses keep employees on payroll and pay necessary expenses like rent and utilities. But as we heard last week in our oversight committee, it became clear that access to the program wasn’t equal for everyone. Prior relationships with big banks led to the exclusion of the smallest of small businesses, putting them at risk of closing permanently.

One of our top priorities for this Committee was empowering community lenders to originate more PPP loans to maximize lending in underserved communities. These institutions typically have deep ties to the smallest businesses. We incorporated set-asides in multiple pieces of legislation to allocate funds so that community lenders could participate in PPP on equal footing with bigger banks.

Both the GAO and outside experts found these changes proved to be effective in making the program more accessible. In later rounds of PPP, the average loan size decreased substantially, and more funding reached businesses in underserved markets.

Moreover, small firms reported the highest level of satisfaction with community-based lenders and small banks. The ability of community lenders to reach underserved businesses should serve as an important lesson moving forward. Though the PPP portal closed last May, these community lenders can be a vital tool as we work to drive an equitable recovery.

In fact, many of the community lenders that helped deliver PPP to underserved businesses are already active in SBA lending programs. Programs like the 504/CDC Loan Program, SBA Microloan Program, and Community Advantage Pilot Loan Program are all delivered by community lenders. Each program has proven effective in helping deliver capital to underserved communities.

By strengthening existing SBA programs that utilize community lenders, we can help ensure that all small firms have access to the capital they need to grow and thrive. Members of this committee have introduced and advanced numerous pieces of legislation to bolster these programs to better serve entrepreneurs.

Today, I look forward to taking a close look at these proposals and hearing directly from community lenders about the issues they face and what we can do to help.

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