HYDE-SMITH COSPONSORS BILL TO STOP SBA OVERREACH IN SMALL BUSINESS LENDING
‘Protecting Access to Credit for Small Businesses Act’ Favors Community Banks & Credit Unions Over the Federal Government
WASHINGTON, D.C. – U.S. Senator Cindy Hyde-Smith (R-Miss.) on Tuesday cosponsored legislation to protect community banks and credit unions from competing with the federal government by repealing a Biden-era rule that would allow the Small Business Administration (SBA) to directly make loans.
The Protecting Access to Credit for Small Businesses Act (S.2486), authored by U.S. Senator Tim Scott (R-S.C.), would prohibit the Small Business Administration (SBA) administrator from directly making loans under the 7(a) loan program, a role traditionally reserved for private lenders, with the SBA serving as a guarantor. If enacted, the bill would restore the 7(a) loan process to pre-COVID era practices.
“Mississippi’s small businesses play a vital role in our state’s economy, and they thrive when local lenders, who understand their communities, are leading the way. With this bill, we want to return the SBA to its traditional role as a guarantor rather than a direct lender, which will allow our private, local financial institutions to continue meeting the needs of our local entrepreneurs,” Senator Hyde-Smith said.
“The SBA has a poor track record as a direct lender, especially compared to local banks that know the communities they serve,” said Senator Scott, chair of the Senate Banking Committee. “Allowing the SBA to directly offer loans is not just another example of government overreach, it would also hurt Main Street by creating unnecessary competition with community banks and credit unions. The private sector has a much stronger record of managing loans effectively, and the last thing we need is big government disrupting a system that local businesses rely on.”
The 7(a) program is the flagship SBA tool for helping small businesses access capital. Through this program, private banks and lending institutions have consistently demonstrated a stronger track record in loan underwriting, credit risk assessment, and borrower support. Returning to this proven model will help maintain responsible lending practices, increase efficiency, and reduce taxpayer risk.
A 2023 SBA Office of Inspector General report showed that the government-led COVID-19 Economic Injury Disaster Loan (EIDL) program had $136 billion in potential fraud (33 percent of total funds disbursed). In contrast, the private-sector-led Paycheck Protection Program (PPP) had $64 billion (8 percent of funds disbursed).
Additional original cosponsors of S.2486 include U.S. Senators John Barrasso, Ted Budd (R-N.C.), Kevin Cramer (R-N.D.), Mike Crapo (R-Idaho), Steve Daines (R-Mont.), James Risch (R-Idaho), and Rick Scott (R-Fla.).
The legislation, which has been referred to the Senate Small Business and Entrepreneurship Committee, is supported by the Mississippi Bankers Association, American Bankers Association, America’s Credit Unions, Independent Community Bankers of America, the Bank Policy Institute, and Consumer Bankers Association, among others.
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