During a House Small Business Committee markup meeting before the Congressional recess, Rep. Nydia Velázquez (D-NY) spoke about an increase to $10 million for 7A business loans.
00:00I now recognize the ranking member to speak on the bill.
00:04Thank you, Madam Chair.
00:06One of my long-standing legislative priorities for modernizing this 504 program
00:13raises the 504 limit for small manufacturers.
00:18But more can be done, and I look forward to continuing discussions
00:23to further strengthen the program.
00:25Turning to 7A, last Congress, we heard concern from our colleagues
00:32on the other side of the aisle about rising default rates.
00:38I share those anxieties and have since been working to better understand the situation.
00:45But apparently, we are dismissing the default rates and just ignoring all the data
00:51we have worked diligently to collect.
00:56I would like to reach an agreement, but it will take more time and more evidence
01:01to ensure we are protecting the program and taxpayers.
01:07I am committed to continuing our discussions to make thoughtful modifications
01:14after additional briefings with the agency.
01:18But let me just lay out some concerns with the text as drafted.
01:23Perhaps most frustrating is the fact that there is no evidence to demonstrate
01:30that the 7A loan limit needs to be increased.
01:34In fact, SBA data shows the opposite.
01:38There is greater demand for manufacturing loans of $1 million and less
01:44than there is for loans greater than $3 million.
01:49Since 2023, there has been over 6,300 manufacturing loans worth $1 million or less,
01:59but only 362 loans worth more than $3 million.
02:05Maybe there could be a demand now that we have erratic tariff policies harming domestic manufacturers.
02:14Unfortunately, we do not know what the need is, nor evidence that manufacturers cannot access financing
02:23in our conventional markets required by the Credit Elsewhere test.
02:30This remains amongst the questions I need answered from SBA.
02:36And I recognize the loan limits having been increased since 2010
02:42and admit there is a conversation to be had on that topic.
02:47However, neither the SBA nor the majority have justified in any way
02:53how they arrived at the $10 million limit.
02:57Instead, this number just seems to be plucked out of thin air
03:01and well beyond the adjustment for inflation.
03:06More importantly, raising the loan limits does not happen in a vacuum.
03:11Defaults have increased annually for the last three years and stands at 3.7%.
03:20More alarming, the 7A loans originated to manufacturers have the second-highest percentage of defaults in the program.
03:31And I want to repeat that.
03:32More alarming, 7A loans originated to manufacturers have the second-highest percentage of defaults in the program.
03:41The 7A program is zero subsidy.
03:45But when defaults are rising, like they are now, the SBA spent more taxpayer money to reimburse lenders for losses,
03:55threatening the program's ability to pay for itself, and necessitating additional congressional spending.
04:03We are on track to reach the overall program cap for the 7A program.
04:09And my fear is that increasing the loan limit for manufacturers risks allowing this loan to use up a disproportionate share of the lending authority,
04:21which could result in fewer small-dollar loans.
04:25I recognize that the House FSGG appropriations bill proposes an increase to the 7A cap,
04:33and I appreciate Mr. Williams' efforts on this point.
04:38But that is just the first step in a lengthy appropriation process,
04:43and there is no guarantee if there will be an increase at all.
04:48I remain committed to working together to find agreement on raising small business loans for manufacturers,
04:54but must be done in a responsible way, and not at the expense of the program's integrity.
05:02Chairman Williams and I have agreed to continue working together on this measure,
05:07and in an effort to make the bill as strong as possible.
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