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National Bankers Association
The National Bankers Association serves a vital role in our economy. For over eight decades, the NBA has advocated for the nation’s minority and women-owned banks and the communities they serve.
Your mission is an important one. Communities and small businesses across the country depend on your banks. It’s a mission that I care deeply about personally, as well.
I come from a small business family. Years ago, my grandfather started a landscaping business in Indiana. He became the first African-American business owner to win a government contract from the state of Indiana.
Later, my grandfather helped my uncle start his own business. When my uncle returned home with a degree in Pharmacy from Howard University, he couldn’t find a job. My grandfather helped him build his own pharmacy to serve the African-American community.
So I’ve seen firsthand what it takes to own a business,and how important business ownership is to minority communities.
We all know the facts about small businesses.
More than half of working Americans either own or work for a small business.
Small businesses create two out of every three new jobs.
They lead the way in innovation, global competitiveness, and economic growth.
Small business owners and entrepreneurs drove America’s economy in the 20th century. For our economy to strengthen and prosper in the 21st century, we must set about creating the next generation of entrepreneurs. And we know that many of those entrepreneurs are going to come from the minority and underserved communities that your banks support.
Now more than ever, we are depending on the businesses in the communities you serve to drive our economy forward. That’s why at SBA, we are working alongside our lending partners to put capital in the hands of small businesses who need it most.
After the Recovery Act passed in February of last year, the SBA was able to help about 70,000 small businesses get our Recovery loans by reducing our loan fees and increasing our guarantee to 90 percent.
It was a good investment. We turned $680 million in taxpayer dollars into more than $30 billion in lending support.
Over 14,000 of those loans went to minority-owned businesses. That’s over $5 billion in lending to minority-owned businesses.
In fact minority and women-owned firms are three-to-five times more likely to receive an SBA guaranteed loan than a conventional loan.
Our Recovery loans were so successful that over the summer, the program ran out of money. For months, businesses have been waiting in our Recovery loan queue for funding to become available for SBA loans with the increased guarantees and reduced fees.
Thankfully, the President just signed the Small Business Jobs Act, which contains anextension of the increased guarantee and fee reductions that have been so successful. When the law was signed, there were nearly 2000 small businesses in our loan queue, waiting for loans with these enhancements.
As of this week, we’ve cleared out the queue. We approved nearly a billion dollars in loans to small businesses.
One of the businesses waiting for a loan was Emanuel Funeral Home, an African American-owned, family business in Palestine, Texas [PRONOUNCED Palesteen]. The owners’ have been in business for 31 years, and they recently took out a conventional loan to pay for their expansion. But the interest rate and payments weren’t ideal, and they turned to Unity National Bank, a member of the NBA, for help refinancing into an SBA loan. They needed the increased guarantee, so they got in line.
I’m happy to say that only a few days after of the signing of the Jobs Act, their loan was approved. With the Jobs Act provisions, it carries a 90% guarantee, and they saved $14,000 in fees.
That’s great news. I believe Tommy Brooks, executive VP of Unity Bank and an NBA board member, is here today. Thank you Tommy for all your hard work.
The Emanuel Funeral Home loan is one of thousands that the Small Business Jobs Act will support. And – just like with the Recovery Act – taxpayers will get a big bang for the buck. We estimate that the $505 million for loan enhancements in the Jobs Act will support about $14 billion in small business lending.
In addition to the enhancements to our loans, the Small Business Jobs Act contains a number of other provisions aimed at expanding access to capital.
We’re more-than-doubling the maximum loan sizes in our top two programs, from $2 million to$5 million. This is a big deal. We know this will help folks who need more capital to quickly create jobs. This includes manufacturers, exporters, contractors, franchisees, and others.
And we’re increasing the maximum size of our microloansfrom $35,000 to $50,000. This is important because our data shows that microloans often benefit entrepreneurs who need startup capital and business owners in underserved communities who often find it harder to get loans. In fact one-third of SBA microloans go to minority-owned small businesses.
There are also two important temporary changes that will help small business owners.
First, SBA is increasing the maximum amount of our Express loans from $350,000 to $1 million. These loans are most often used by borrowers for working capital to grow their business. They’re popular among lenders because of the streamlined approval process. And over the last five years, on average, more than one quarter of SBA Express loans have gone to minority-owned firms.
Second, we’ll allow some small businesses to refinance their owner-occupied commercial real estate mortgages into our 504 program. Many of their mortgages will mature in the next few years, and face balloon payments as a result. With real estate values having taken a hit, many of these business owners will have trouble getting a bank to refinance them.
Letting them refinance into 504 is a win-win. It will provide the business owner with more stable financing. And, for the lenders who hold those mortgages, it will free up capital to make more small business loans.
As I said, we’ve already started funding loans with increased guarantees and waived fees. We expect to roll out our increased loan sizes within the next 3 months. 504 refinancing will come shortly thereafter. All told, we have 14 new programs to stand up. We have our work cut out for us, and I appreciate your patience and support as we work to implement this important law.
Beyond SBA, our partner agencies will also be working to increase small business lending because of the new law.
For example, Treasury is setting up the new Small Business Lending Fund. This fund will provide $30 billion in capital for smaller community banks. Essentially, it provides you with low-cost capital—with interest rates as low as 1%—if you go above and beyond your 2009 small business lending levels. We know that if your bank participates, you will leverage the funds you borrow several times over, and put much needed capital in the hands of small businesses.
The Small Business Jobs Act also contains provisions to increase small business contracting, strengthen SBA’s counseling network, and encourage small business exporting. It contains eight tax cuts for small businesses.
But the Jobs Act isn’t the only way that SBA is working to support you and your banks. For instance, I’m excited to be leading the Advisory Council on Underserved Communities that SBA is announcing this fall. We’re bringing together the best and the brightest to promoting business growth and entrepreneurship in underserved communities, including inner cities, rural areas, and minority communities. You know as well as I do how important it is to increase access to capital in underserved areas. I know we’ll have your support in this effort.
For years, the NBA and the SBA have worked together to put capital in the hands of small businesses. Today, this partnership is more important than ever.
Throughout the United States, there are healthy small businesses that are ready to grow. Businesses like Emanuel Funeral Home. Businesses like the ones you work with every day. Together, with the tools provided by the Small Business Jobs Act, we can get these businesses what they need.
I’m looking forward to working closely with all of you as we help these small businesses grow, create jobs, and drive our economy forward.