ICBA testifies on harm of SBA direct lending

ICBA told Congress that community banks are critical to the success of Small Business Administration lending programs, which should not be undermined by instituting direct SBA lending under its 7(a) program.

Hearing: Robert J. Barnes—president and CEO of PriorityOne Bank in Magee, Miss.—told the House Small Business Committee’s Subcommittee on Oversight, Investigations, and Regulations that while community banks are instrumental in the Paycheck Protection, 7(a), and 504 programs, the SBA has a poor track record of direct lending.

Details: In his testimony, Barnes said:

• Community banks were the predominant Paycheck Protection Program lenders.

• ICBA and community banks support the fiscal 2022 funding bill’s increase in the 504 program’s authorization cap.

• Whereas community banks experience low rates of fraud, the SBA’s direct-lending Economic Injury Disaster Loan program has been rife with fraud and poorly executed.

• Previous SBA direct-lending efforts have failed, with the agency halting 7(a) program direct lending because the subsidy rate was “10 to 15 times higher” than for its loan guaranty programs.

• Congress should avoid repeating past direct-lending mistakes.

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