WASHINGTON — The Small Business Administration 7(a) Loan program is a success that has encouraged economic growth and should be vigorously supported in the future, according to testimony from the American Bankers Association before the House Small Business Subcommittee on Investigations, Oversight and Regulations today.
Ted Ashby, president and CEO of Surrey Bank & Trust in Mt. Airy, N.C., testified on behalf of ABA. Ashby noted that community banks in particular focus intensely on small business lending, which is critical to economic growth and job creation.
“The SBA programs support this and help fill a critical gap, particularly for early stage businesses that need access to longer-term,” Ashby said. “The guarantee helps reduce the risk and capital required for banks, and facilitates loans that might never have been made without this important level of support.”
Ashby testified that there are many positive features of the 7 (a) program that help facilitate lending that may not have been possible under conventional financing which often requires an abundance of collateral, a guarantor or shorter loan amortizations.
“The central focus of these features are that they reduce the cost of the transaction, lower the collateral requirements, provide fast response times, improve cash flow and reduce the amount of working capital needed,” Ashby said.
Ashby also noted some improvements that can be made, primarily related to servicing of SBA loans.
“These include consolidating loans, allowing portfolio lenders to obtain a guaranty to avoid loans-to-one borrower limitations, facilitating an ‘offer in compromise’ in cases where there may be multiple loans and making the SBA One platform fully operational, which will reduce duplication to close a loan,” Ashby said.
Ashby testified that the success of the program has been replicated over and over in communities across the country.
“This is why ABA supports the Small Business Committee’s effort to build on the positive aspects of the program and consider improvements that would benefit the business community,” Ashby said. “The SBA 7(a) Loan Program is a success and should be vigorously supported in the future. It has encouraged economic growth in our community and has allowed Surrey Bank to meet the credit needs of many small businesses.”
For a copy of Ashby’s full testimony, please click here.