Good morning. I’m happy to be here. In the six months that I’ve been traveling the country as Deputy Administrator, I’ve heard time and again about business owners who, despite tough times, have used SBA loans to grow their business.
After credit markets froze and credit lines were cut, nearly 70,000 businesses got an SBA Recovery loan. And behind every one of those loans was the partnership between SBA and people like you. I think that deserves a round of applause.
And I want to recognize Eric Zarnikow, who has led the charge every step of the way. Eric – We will miss you. And Steve – I know you’re going to do a great job.
With your help, SBA lending increased 90% while conventional small business lending remained tight. But today, America’s small businesses still have trouble finding access to capital. In fact, according to the NFIB, only 40% of small businesses currently have their credit needs met.
In this critical time, the partnership between the SBA and you is more important than ever. It’s essential that we strengthen our partnership, and continue to meet the needs of small businesses as they grow the economy and create jobs.
In October 2008, after credit markets froze, loans to small businesses were virtually non-existent. That’s why the President and Congress acted swiftly to pass the Recovery Act, which raised the guarantees and eliminated the fees on SBA loans. As you know, this two-part formula worked. With your help, we turned $680 million in taxpayer dollars into $30 billion in lending support to small businesses. And the best part is this: Our borrowers tell us that SBA Recovery loans created hundreds of thousands of jobs. Moreover, while many lenders were pulling back from small business lending, more than 1,300 banks and credit unions came back to SBA lending, which provided more points of access to capital in their communities. Some of you might be here today. In fact, last year, Administrator Mills set a goal of increasing our lending partners to 3,000. And just a few weeks ago, we met that goal during Fiscal Year 2010— which was a full year ahead of schedule.
And more SBA lenders mean more success stories.
Recovery loans helped business owners like Cary Dillman, of Dillman Farms in Bloomington, Indiana –the state I’m from. Cary had spent $100,000 of his own money on new product labels and packaging, to get his jams and jellies onto supermarket shelves. But at the same time, his bank called in his line of credit. It was a case of bad timing. He went looking for another loan, but five banks turned him down. That’s when he found an SBA lender, Fifth-Third Bank, who I believe is represented here today. A 7(a) loan helped Cary shore up his finances and complete his expansion. As a result, Dillman Farms jams are available at major grocery stores throughout Indiana. Cary said his SBA loan “saved the family businesses.”
We’ve heard that a lot.
In fact, these Recovery loans were so successful that we ran out of money—five times. We kept returning to Congress, asking them for more support to build on our success. That worked until this summer when we ran out once again, and our loan volume plummeted.
Then, after months of waiting, Congress passed the Small Business Jobs Act in September.
This is the largest, most important piece of small business legislation in more than a decade. This law gives us a number of new tools and resources to support small businesses. Many parts of the law are provisions the President, SBA, and supporters like you, have wanted for years.
Now that the law has been passed, the work begins. The lending provisions in the Small Business Jobs Act are numerous.
It continues the increased guarantees and waived fees that made our Recovery loans so effective. We’re already approving Jobs Act loans with increased guarantees and waived fees. When the bill passed, there were 2,000 businesses waiting for one of these loans. With your help, we cleared out our queue and approved $1 billion in loans in the first week. As Eric mentioned yesterday, we’ve provided nearly 5,000 Jobs Act loans which have supported $2.2 billion in just a month.
We’ve also rolled out other major changes in record time. For example, we permanently, more-than-doubled the maximum loan sizes in 7(a) and 504, from $2 million to $5 million. This will help folks who need more capital to quickly create jobs, such as exporters, contractors, franchisees, and others. Already, we’ve approved dozens of theses higher-limit loans, worth nearly $70 million.
We also expanded the “alternate” size standard to help more small businesses who want to work with you to get a 7(a) or 504 loan. Small businesses with less than $15 million in net worth and $5 million in average net income can now qualify. This will help thousands more small businesses use SBA loans to grow their firms and create jobs.
The law also contains several temporary provisions which will give small businesses a shot-in-the-arm.
First, how many of you use Express loans? We increased the maximum amount of Express loans from $350,000 to $1 million through next September.
Second, we’ll be able to let some small businesses refinance their owner-occupied commercial real estate mortgages into our 504 program. This will provide the business owner with more stable financing, and, for the lenders who hold these mortgages, it will free up capital for you to make more small business loans. We expect to roll out 504 refinancing in the coming months, after we complete the regulations and program guidance for this brand new program.
And I could go on. The law also expands SBA’s Dealer Floor Plan pilot initiative… It creates a Lending Fund for $30 billion and a State Credit Initiative through the Treasury Department. It contains 8 new tax breaks for small businesses – including bigger write-offs for investments in new equipment. And it contains dozens of provisions that will help more small businesses get the counseling and the federal contracts to grow and create jobs.
So we have a big job to do.
But I’m pleased to say that we’re already making an impact for people like Herb Caudill who founded Caudill Web Design in 2004. The Washington, DC, company builds websites for international development projects and government agencies. It has grown steadily and has three employees. Right now, they have a good problem: They’ve got more work than they’re able to accept. Herb got in line for an SBA loan, and when the Jobs Act passed, SBA approved it. We just talked to Herb on Monday, when he closed on his loan. He told us that he’d be getting the money this week to hire more programmers and designers so he can take more projects.
Another example: Just 20 miles east of here in Corona is a company called Peabody Engineering. They’re a second-generation, family-owned manufacturer of storage tanks.
They had a tough couple of years but recently they got some new contracts and they need to hire 10 more people. A Jobs Act loan for $940,000 from Pacific Enterprise Bank is on track to help them do just that.
These loans and the thousands more made possible by the Jobs Act are a step in the right direction. But even as we work to implement these new programs, at SBA we are also looking to the future. The partnership we have is a strong one, and my hope is that it will grow even stronger. Looking to the future, I see a number of ways we can work together to reach even more small businesses.
First, SBA is just a few weeks away from unveiling the new SBA.gov, which I believe will be one of the most advanced websites in the federal government, and a premier resource both for you and your communities. Business owners and entrepreneurs will be able to log in and see what resources are available in their area—including where to find an SBA lender. Meanwhile, lenders will have easy access to all the forms they need, the most recent SOPs, and tools like E-Tran, all in one place. This new website will get you the tools you need and make you more accessible to small business owners. It’s great news. I know that later today, our own Jess Knox is going to discuss the lender section of the website in more detail.
Second, SBA is part of a government-wide push to double the amount of US exports in five years. It’s called the President’s National Export Initiative. With advanced technology and global connectivity, new markets are opening up for small businesses every day. Small businesses are the sector of the economy most poised for growth through exporting.
But exporting can require a big up-front investment. The capital requirements can be a barrier to entry. That’s why the higher loan sizes will help get more capital in the hands of small business exporters. I encourage you to check out our international trade loans. We have three programs: Export Working Capital, Export Express, and International Trade Loans, all of which are useful tools that got a boost in lending limits from the Jobs Act. So when a small business comes to you for help expanding, ask them if they’ve thought about exporting. Let them know that you and the SBA can help with a loan.
Third and finally, as we recover from the worst economic downturn since the Great Depression, it’s more important than ever to be accessible to all members of the small business community. That means reaching out into underserved markets, such as urban and rural areas, as well as minority- and women-owned businesses. At the Administrator’s request, I’m looking at how our programs are reaching these groups. We already know that our loans are three to five times more likely to go to women and minorities than conventional loans. We want to build on statistics like that. But we need your help. We need you to make sure that SBA products are available throughout your community, to every small business that walks through your doors. Stay tuned, and I thank you in advance for your help on this.
In closing, I just want to say what a pleasure it is to be working with all of you. More than anyone else, you know first-hand how important the Recovery Act and the Jobs Act are. You know people like Cary Dillman in Indiana, Herb Caudill in Washington, DC, and Jim Harper whose shop is just a few miles from here.
It’s not about us, because we’re not the ones who create the jobs. It’s about them.
It’s about putting the right tools in their hands – so that they can create the jobs and move America forward.
We’ve just been handed a whole new toolbox – the Jobs Act. It’s full of tools for helping small businesses grow. The country is counting on us to get this right. I’m looking forward to getting started, and I know you are, too. With your partnership, we will continue to help small businesses lead us to full economic recovery. Thank you.