Thank you Mr. Chairman.
Access to capital is one of the most critical components
to business success. A business that can obtain funding
quickly and at a reasonable cost has a much greater chance
of succeeding. Unfortunately, for many small businesses,
getting access to cash flow is not always that easy. One
only needs to look at the fact that the vast majority
of business start-ups are done not by conventional loans,
but by credit cards to realize this. Yes, credit cards
are readily accessible, but they are high cost and hold
the potential to quickly saddle a business with a stifling
amount of debt.
Make no mistake, lending for business start-up and expansion
is very much a high-risk -- high reward venture. I believe
that many of our financial institutions are looking for
innovative ways to assist small businesses to obtain the
funds they need to start and grow their business. Unfortunately,
banks can not do it alone. Not only do they operate at
a time when federal regulators prod banks to tighten loan
underwriting criteria - - - they must also operate in
a new era created under Graham-Leach-Bliley that has spawned
a very competitive environment for the deposit that make
it possible for lenders to make loans.
Today, with so many different competing interests vying
for those increasingly scarce funds, it is no wonder both
lenders and borrowers are frustrated. This is where the
SBA loan programs come into play, with their ability to
guarantee funds that allow banks to set aside less of
their scarce deposits and maximize their lending potential.
By doing this, we increase the ability of our financial
institution to offer loan opportunities for small businesses.
This partnership has been so successful that currently
SBA loan programs account for 40% of all long term small
business loans nationwide. It is because of this relationship
that you can not talk about access in the private lenders
market without considering it within the context of SBA's
loan programs.
That's why the proposal by the Bush administration to
increase fees is not only harmful to our small business
owners, but it is harmful to our lending system. Time
and time again when fees on these programs have been increased,
the ability for banks to offer loans has plumeted. At
a time when our economy is creating more questions than
it is answers, we need a strong and well functioning guarantee
loan system to ensure that our small businesses have access
to the capital they need to survive.
In closing, it is clear that access to capital for small
business is truly access to opportunity, which is why
this committee has spent so much time working to ensure
that our nation's small businesses can access the funds
they need to start and grow their businesses. I want to
thank the witness for coming here today and I look forward
to hearing their testimony.
