On May 2, NSBA President Todd McCracken participated in a Senate Committee on Small Business and Entrepreneurship roundtable on reauthorization for the U.S. Small Business Administration. The roundtable focused discussed S. 1256 (the Small Business Lending Reauthorization and Improvements Act of 2007.

The vast majority of the provisions contained in S. 1256 -- which was introduced by Sen. John Kerry (D-Mass.) and Ranking Member Olympia Snowe (R-Maine), and co-sponsored by Senators Mary Landrieu (D-La.), Carl Levin (D-Mich.), Barack Obama (D-Ill.), and Jon Tester (D-Mont.) -- were part of the SBA reauthorization bill that unanimously passed the committee during the 109th Congress.

Unanimously approved by the committee on May 16, the bill would increase the 7(a) loan size limit from $2 million to $3 million. It also would allow small businesses to obtain financing in the maximum amount permitted under both the 7(a) and 504 loan programs. The bill also would allow the administrator to lower 7(a) loan fees on borrowers and lenders.

S. 1256 would establish a preferred lender program for certain 7(a) lenders with demonstrated efficiency, granting them the ability to approve and liquidate 7(a) loans. It also would establish a nationwide streamlined preferred lender program, and a child care lending pilot program. The bill also directs the Government Accountability Office to conduct a study of the Microloan program.

S. 1256 is something of a companion bill to H.R. 1332, which the House of Representatives approved 380-45 on April 25. Designed to end the Bush administration's "zero subsidy" policy on the 7(a) program, H.R. 1332 would permit the SBA to contribute funds for the purpose of reducing borrower and lender fees. Fee contributions would be commensurate with an appropriation and a specified program level. The measure also would make the Community Express program permanent and allow a borrower to obtain financing in the maximum amount permitted under both the 504 and 7(a) programs. The Bush administration opposed the measure.

New 7(a) Lender Fees

The SBA published a final rule on May 4, which allows the agency to impose fees on 7(a) lenders to pay for examinations, reviews, and other oversight activities. This impending publication was revealed during the roundtable, much to the dismay of those present, including committee staff. The move was opposed by the National Association of Government Guaranteed Lenders (NAGGL), the American Banking Association, and the Independent Community Bankers of America, which claimed that the fees would lead to higher interest rates and decreased small-lender participation. The SBA argued that having lenders pay the actual costs to the SBA of both on- and off-site examinations was appropriate because other federal financial regulators assess similar fees in size and scope to their institutions. NAGGL called the fees "an effort to transfer overhead" to lenders.

The rule will become effective June 4.