Efforts to temporarily extend the small-business provisions of the American Recovery and Reinvestment Act (ARRA) encountered an unexpected obstacle in the U.S. Senate in the form of retiring Sen. Jim Bunning (R-Ky.)

In recent days, Bunning rebuffed repeated efforts by Democrats and some Republicans to pass a 30 day extension of a number of expired programs, including unemployment and COBRA benefits and the U.S. Small Business Administration (SBA) provisions of the ARRA.

The ARRA’s provisions providing a 90 percent guarantee on SBA 7(a) loans and eliminating the borrower fees on both 7(a) and 504 SBA loans expired on February 28. Bunning attributed his objection to the extensions not being offset by pay-go rules.

Last night, after reaching an agreement with Senate Democrats that allowed him to offer an amendment proposing how to pay for the extensions, Bunning finally relented and allowed a vote on extending the provisions. The bill was approved 78-19.

According to the SBA, the $500 million appropriated for these provisions since February 2009 has supported more than $20 billion in lending to small businesses across the country and has lead to an increase to its average weekly loan volume of almost 90 percent. The provisions also have helped entice nearly 1,100 institutions back to the SBA’s lending programs.

For its part, the U.S. House of Representatives approved legislation (H.R. 4691) which would extend the aforementioned provisions through March 28, by voice vote on Feb. 25, 2010.

Unfortunately, this is the second time Congress has allowed these provisions to expire. The SBA ran out of its original $375 million in stimulus funds on Nov. 23, 2009. Congress ultimately reinstated the provisions on Dec. 21—with an additional $125 million in funding—but not before the SBA was forced to establish a Recovery Loan Queue for the aspiring borrowers willing (or forced) to bet that the stimulus provisions eventually would be restored. During this abeyance, nearly 1,000 small firms, seeking approximately $500 million in loans, signed up for the waiting list

NSBA is extremely disappointed that Congress, once again, allowed these critical, effective, and cost-effective provisions to expire, especially given the overall capital climate for small-business owners. According to a report issued last week by the U.S. Department of the Treasury (Treasury), 11 of the top TARP recipients cut their small-business loan balance by more than $2.3 billion in December, marking the eighth consecutive month (at least) of constriction by these banks.

Since April, when Treasury began requiring the 22 largest TARP recipients to report their small-business lending, seven of the 11 banks cut their small-business loan balances each month. The situation for the 10 banks that completely have repaid their TARP funds is not necessarily better, but they no longer are required to report their small-business lending. The remaining bank, CIT Group, filed for bankruptcy in November and its TARP infusion has been written off by Treasury. CIT Group had been the largest SBA 7(a) lender for nine consecutive years.

Despite the delay imposed by Bunning, the Senate has been crafting a more-long term reauthorization package, which would extend many of the small-business provisions through Dec. 31, 2010, as called for by NSBA. This extension is estimated to cost $354 million over ten years and would support $18.5 billion in 504 and 7(a) loans to small businesses.  

NSBA is hopeful this extension will be signed into law soon.