Republicans tear direct SBA loans in Dems Atonement Act: “Inefficient, Costly and Unjust”
EXCLUSIVE: republican Legislators beaten up Democratically Heads of state and government on Wednesday for including a provision in their comprehensive reconciliation bill that allocates billions to the Small Business Administration for direct lending, calling it a “costly” way to get their hands on credit small businesses.
In a letter to Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi, 15 GOP Senators – led by South Carolina Senator Tim Scott – raised the alarm over the approval of nearly $ 4.5 billion for the next decade for the SBA, the popular 7 (a) loan and $ 2.8 billion for 504 loans straight into the Democrats’ tax and expense bill of $ 3.5 trillion.
As part of the measure, small business owners could contact the SBA directly for access to capital rather than going to private lenders and banks.
“We believe that this would be an inefficient, costly and unfair position to face both lenders and borrowers,” wrote Republicans in the letter, which is also addressed to the Democratic small business leaders.
GOP lawmakers cited the large discrepancy between paycheck protection program loans administered by banks and other private institutions and economic damage loans administered by the SBA.
For example, in FY2020, the SBA approved 42,402 7 (a) loans worth approximately 22.6 billion. Republicans hailed the SBA’s partnership with private lenders as “massively successful” in bringing money to small businesses due to struggled with the pandemic.
However, they pointed to the high rate of fraud in the direct handling of EIDL loans by the SBA: The SBA’s inspector general recently uncovered $ 78.1 billion in potentially fraudulent EIDL activity; At the same time, the SBA had paid out $ 290 billion in COVID-19 EIDL loans and grants by mid-September – which means the fraud rate could be up to 30%.
In comparison, the potential fraud rate for PPP loans is estimated at around 4.6%. Senators noted that PPP lending depends on banks, credit unions, fintechs, and other private sector lenders, while the EIDL program is entirely government managed.
“This misguided liberal plan would withhold taxes from small business owners and then loan them back to them with interest,” Scott said in a statement to FOX Business. “It doesn’t make any sense. The private sector is just a lot more efficient at running these programs than the big government. This is another part of the Democrats’ massive plan to put the government in control of virtually every aspect of American life.”
Democrats have argued that the measure is intended to help small business owners who were “left behind” by the PPP – a vital lifeline during the pandemic – because they had no banking relationships or their banks were prioritizing larger, more profitable loans.
But Republicans opposed the Reconciliation Act to instead expand the pool of lenders in the 7 (a) program – and give borrowers more options – instead of “giving the SBA the reins to run its own loan program,” which “makes it harder to exist could”. Attendance lenders and event lenders would like to participate in the program. “
“As the United States emerges from the COVID-19 pandemic, small business growth and entrepreneurship must be a top priority,” the letter said. “Unfortunately, under the reconciliation laws currently under consideration, it will hurt the SBA, among others, to set up and run a credit program that they regulate themselves.
Fox News’ Andrew Murray contributed to this report