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Legislative bills

Senators Introduce Bill to Protect Community Banks and Credit Unions from Direct Government Lending

Strategic Insights

— 1 min read

Senate Republicans led by South Carolina Senator Tim Scott have reintroduced the Protecting Access to Credit for Small Businesses Act, a bill designed to prevent the Small Business Administration (SBA) from directly making loans under the 7(a) program. The bill aims to preserve the private sector's role in lending to small businesses, which is critical to their growth and development. By allowing the SBA to directly make loans, the federal government would be competing with community banks and credit unions, ultimately undermining access to capital for small businesses.

Key Takeaways:

  • The Protecting Access to Credit for Small Businesses Act seeks to prohibit the SBA from directly making loans under the 7(a) program, which has been proposed by President Biden's fiscal year 2025 budget.
  • The bill is supported by a coalition of banking and credit union associations, including the American Bankers Association, America's Credit Unions, and the Independent Community Bankers of America.
  • Community banks and credit unions have a proven track record of effectively lending to small businesses, with 99% of all businesses in Montana, for example, relying on them for access to capital.
  • The SBA's direct lending program in the COVID-19 Economic Injury Disaster Loan (EIDL) program had $136 billion in potential fraud, compared to the private-sector-led Paycheck Protection Program (PPP) which had $64 billion in potential issues.
  • Senator Scott has led efforts to push back against the Biden administration's attempted federal overreach into the direct lending space, introducing the bill in the 117th and 118th Congress and sending a letter to Senate leaders warning against the plan.
  • The bill has been endorsed by several key organizations, including the Carolinas Credit Union League and the Consumers Bankers Association.

Statistics:

  • 99% of all businesses in Montana rely on community lenders for access to capital.
  • The COVID-19 Economic Injury Disaster Loan (EIDL) program had $136 billion in potential fraud (33% of total funds disbursed).
  • The Paycheck Protection Program (PPP) had $64 billion (8% of funds disbursed) in potential issues.
  • Senator Scott has introduced the Protecting Access to Credit for Small Businesses Act in both the 117th and 118th Congress.

Sources:

  • South Carolina Senator Tim Scott
  • American Bankers Association
  • America's Credit Unions
  • Bank Policy Institute
  • Carolinas Credit Union League
  • Consumer Bankers Association
  • Independent Community Bankers of America
  • South Carolina Bankers Association

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