May 25, 2022
C-Suite Wednesday – Is SBA Doing Their Job? Asks Congress
Even with the major increases in SBA lending throughout the pandemic, almost 60% of small business owners did not have their capital needs met. The House Committee on Small Business held a hearing reviewing the management of the Office of Capital Access. SBA data shows that the number of 7(a) loans that are $150,000 or less declined more than 50% since fiscal year 2016. 7(a) loans that are $50,000 or less decreased by almost 58% during the same period. Instead, in fiscal year 2021 44% of the 7(a) volume went to borrowers seeking $2 million and greater. Compared to fiscal year 2012, this is a 19% increase in loan volume going to high-dollar borrowers.
“Our nation’s 30 million small businesses come in all shapes and sizes across various industries. But regardless of the product they sell or the number of employees on their payroll, the ability to access capital is crucial to their success. Unfortunately, our committee frequently hears from entrepreneurs about their struggle to obtain an affordable loan on reasonable, non-predatory terms,” says Chairwoman Nydia M. Velazquez. “Today, I would like to hear from our witness about what is working well at the office and the challenges they face. This is especially important in the wake of an unprecedented increase in demand for SBA’s traditional lending offerings.
I’d also like to discuss the steps OCA is taking to help create a more equitable small business economy. Administrator Guzman stressed the importance of small-dollar loans when she testified before the committee last month, so I’d like to hear more about OCA’s work to ensure that all small firms have access to the capital they need to thrive.”
“As the SBA transitions its focus from pandemic relief to its core mission, the agency has never had more startups to support. As any entrepreneur knows, new startup businesses need capital,” said Patrick Kelley, Associate Administrator of the Office of Capital Access at SBA. “Not only is access to affordable, timely capital key to small business growth and survival generally, but it is particularly vital in today’s economy, which is marked by both high growth and rising demand, as well as headwinds such as rising prices and a changing labor market. The SBA’s core lending programs are supporting this dynamic cohort of new businesses through the tailwinds and headwinds of today’s economy.”
During the hearing, the Committee discussed that the number of active 7(a) lenders is decreasing and providing fewer access points to 7(a) loans. In fiscal year 2021, there were 1,639 lenders in the 7(a) program, a 54% decrease from the number of 7(a) lenders a decade ago. SBA found that the top 50 7(a) lenders lent nearly 50% of the total 7(a) volume in fiscal year 2021.
To address this, Patrick Kelley says that they plan to build off the momentum of participation from the COVID programs and simplify products to reach more lenders and banks.