Levin Introduces Bill to Help Small Businesses Secure Loans
Tuesday, November 17, 2009
WASHINGTON – Sen. Carl Levin, D-Mich., introduced legislation today that would provide flexible loans to small businesses suffering from a lack of credit due to poor economic conditions or changes in the financial market.
“The international economic crisis has taken a huge toll on small businesses, which have been devastated by the lack of available credit,” said Levin, who is a senior member of the Senate Small Business Committee. “The credit crunch has led to loss of sales, layoffs, and dwindling profits, creating a downward spiral: as businesses suffer, the challenge of securing credit becomes even more difficult. This intermediary lending program would provide credit to businesses that can’t get loans from conventional banks, allowing them to hire employees and get their businesses back on track.”
Levin’s bill, the Small Business Intermediary Lending Pilot Program Act of 2009, would authorize a new three-year pilot program in which the Small Business Administration (SBA) would make loans to local private non-profit lending intermediaries to capitalize small business revolving funds. The three-year program would permit the SBA to make 20-year loans, on a competitive basis, to up to 20 non-profit lending intermediaries with a maximum amount of $3 million per loan. Intermediaries would, in turn, use the loans to make loans up to $200,000 to small businesses in need of flexible debt financing.
The loans would target businesses with credit needs that exceed the loan limits of the SBA's microloan program and that, for a variety of reasons, including lack of sufficient collateral, are unable to secure the credit through a conventional lender or through SBA’s 7(a) loan program.
This program design – providing low cost, long term loans to capitalize an intermediary loan fund - has been utilized successfully by a program at the U.S. Department of Agriculture (USDA) that has been in operation since 1985. Under that program, which provides one-percent, 30-year loans to intermediaries, there have been no defaults to date. Unlike the USDA program, which is limited to rural areas, the pilot will serve both urban and rural regions.