Republicans rip direct SBA lending in Dems’ reconciliation bill: ‘Inefficient, costly and inequitable’

Republican lawmakers lambasted Democratic leaders on Wednesday for including a provision in their sweeping reconciliation bill that would allocate billions to the Small Business Administration for direct lending, slamming it as a “costly” way to get loans into the hands of small businesses. 

In a letter to Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi, 15 GOP senators – led by Sen. Tim Scott of South Carolina – sounded the alarm over the authorization of nearly $4.5 billion over the next decade for the SBA to issue directly the popular 7(a) loans and $2.8 billion for 504 loans in the Democrats’ $3.5 trillion tax and spending bill. 

Under the measure, small business owners would be able to go straight to the SBA to access the capital, rather than to private lenders and banks. 

“We believe this would be an inefficient, costly and inequitable position to put both lenders and borrowers,” the Republicans wrote in the letter, which is also addressed to the Democratic small business chairs.  

The GOP lawmakers cited the vast discrepancy between the issuance of Paycheck Protection Program loans, which were administered by banks and other private institutions, and Economic Injury Disaster Loans, which were handled by the SBA.  

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Democrats have argued the measure is intended to help small business founders who were “left behind” by the PPP – a vital lifeline during the pandemic – because they lacked banking relationships or their banks prioritized larger, more profitable loans.

But Republicans countered the reconciliation bill should instead expand the lender pool in the 7(a) program – giving borrowers more options – rather than “giving the SBA the reigns to run its own lending program,” which could “make it more difficult for existing lenders to participate and potential lenders to event want to join the program.”

“As the United States emerges from the COVID-19 pandemic, the growth of small businesses and entrepreneurship must be a top priority,” the letter said. “Unfortunately, under the reconciliation legislation currently under consideration, among other provisions, allowing the SBA to establish and run a lending program that they themselves regulate will harm job creators and hurt the United States as a whole.”