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[Senate Report 114-268]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 111
114th Congress }                                          { Report
                                 SENATE
 2d Session    }                                          { 114-268

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         THE SMALL BUSINESS LENDING REAUTHORIZATION ACT OF 2015

                                _______
                                

                  May 26, 2016.--Ordered to be printed

                                _______
                                

 Mr. Vitter, from the Committee on Small Business and Entrepreneurship 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1001]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 1001) to establish 
authorization levels for general business loans for fiscal 
years 2015 and 2016, having considered the same, reports 
favorably thereon without amendment and recommends that the 
bill do pass.

                            I. INTRODUCTION

    The Small Business Lending Reauthorization Act of 2015 (S. 
1001) was introduced by Senator James Risch, with original co-
sponsorship from Senators Ayotte, Coons, Gardner, Hirono, 
Peters, and Shaheen, on April 16, 2015.
    The Small Business Lending Reauthorization Act of 2015 
increases the Small Business Administration's (SBA) 7(a) Loan 
Program authorization level to $20.5 billion in fiscal year 
2015 and $23.5 billion in fiscal year 2016.
    During the markup of the bill, the bill was approved 
unanimously by voice vote.

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    The 7(a) Program's loans are made by SBA partners (mostly 
banks but also some other financial institutions) and partially 
guaranteed by the SBA. As such, taxpayer funds are only used in 
the event of borrower default. This reduces the risk to the 
lender but not to the borrower, who remains obligated for the 
full debt, even in the event of default.
    The 7(a) loan offers flexibility, such as longer terms and 
lower down payments, compared to other types of business 
financing. 7(a) loans contribute to small business growth, 
because with longer terms and lower payments, owners can retain 
working capital and maximize cash flow. These loans are 
eligible to be used for standard business operations such as 
purchasing equipment, machinery, furniture, fixtures, supplies 
or materials, purchasing real estate, including land and 
buildings, constructing a new building or renovate an existing 
building, and establishing a new business or assisting in the 
acquisition, operation or expansion of an existing business.
    The 7(a) program's current guaranty rate is 85% for loans 
of $150,000 or less and 75% for loans greater than $150,000 (up 
to a maximum guaranty of $3.75 million--75% of $5 million). 
Although the SBA's offer to guarantee a loan provides an 
incentive for lenders to make the loan, lenders are not 
required to do so. There has been an increased demand for 7(a) 
loans, from $15.25 billion in FY12 to over $19.2 billion in 
FY14 through over 52,000 7(a) loans. Recent data has shown an 
increase in demand with industry experts predicting that volume 
will reach $20.5 billion by the end of FY15, significantly more 
the $18.75 billion approved by Congress last December. 
According to documents released by the SBA, the number of 
smaller loans (those under $150,000) increased by 23 percent in 
FY13, from 24,923 to 30,675. The 7(a) program's maximum gross 
loan amount for any one 7(a) loan is $5 million (up to $3.75 
million maximum guaranty). In FY2014, the average approved 7(a) 
loan amount was $368,737.
    Last year Congress increased the 7(a) authorization to 
$18.75 billion as part of a Continuing Resolution late in the 
fiscal year. Without this increase more than $200 million in 
7(a) loans would not have been made to small businesses.

                      III. HEARINGS & ROUNDTABLES

    In the 111th Congress:
    On October 1, 2009, the Senate Committee on Small Business 
and Entrepreneurship held a roundtable discussion titled 
``Reauthorization of SBA Finance Programs and the Impact of the 
Small Business Provisions in the Recovery Act.'' After the 
passage of the 2009 Recovery Act, 7(a) loans quickly became one 
of the most active SBA programs, especially as banks began to 
tighten their lending standards. The increased importance of 
working capital for established small businesses was also cited 
as a reason for the amount of applicants for the 7(a) program. 
Associate Administer for SBA Eric Zarnikow expressed concern 
that the 7(a) Loan Program, due to the volume of loan 
applicants, would run out of funding by November.
    In the 112th Congress:
    On June 16, 2011, the Senate Committee on Small Business 
and Entrepreneurship held a hearing titled ``An Examination of 
SBA Programs: Eliminating Inefficiencies, Duplications, Fraud 
and Abuse.'' With the SBA having delivered over $42 billion in 
authorized loans to small businesses through the 7(a) Loan 
Program, Executive Vice-President of the SBA Lending Division 
Greg Clarkson expressed concern that they would exceed the 7(a) 
Loan Program's authorized amount for FY2011. These budgetary 
shortfalls could have resulted in curtailment of credit or 
temporary termination of the loan program until more funding 
was received, leaving hundreds of small businesses without 
guaranteed loans.

                        IV. DESCRIPTION OF BILL

    S. 1001, the Small Business Lending Reauthorization Act of 
2015 increases the 7(a) loan program authorization level to 
$20.5 billion in fiscal year 2015 and $23.5 billion in fiscal 
year 2016.

                           V. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on April 23, 
2015.
    A motion to adopt the Small Business Lending 
Reauthorization Act of 2015, a bill to establish authorization 
levels for general business loans for fiscal years 2015 and 
2016, was approved unanimously by voice vote with the following 
Senators present: Senators Vitter, Risch, Fischer, Gardner, 
Ernst, Ayotte, Enzi, Shaheen, Cantwell, Cardin, Heitkamp, 
Booker, Coons, Hirono, and Peters.

                           VI. COST ESTIMATE

    In compliance with rule XXVI (11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office:

                                                      June 9, 2015.
Hon. David Vitter,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1001, the Small 
Business Lending Reauthorization Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

S. 1001--Small Business Lending Reauthorization Act of 2015

    S. 1001 would set the maximum amount of debt that the Small 
Business Administration (SBA) can guarantee under the agency's 
general business loan program, also known as the 7(a) program, 
at $20.5 billion for fiscal year 2015 and $23.5 billion for 
fiscal year 2016. The agency's 2015 authorization level for 
loan guarantees under the 7(a) program is currently $18.8 
billion.
    Under current law, businesses participating in the 7(a) 
program are required to pay various fees that are sufficient to 
offset the program's estimated subsidy cost, that is, the 
estimated long-term cost to the government of a loan guarantee, 
calculated on a net-present-value basis. Based on information 
from the SBA, CBO expects that increasing the loan levels for 
the program would not affect the estimated subsidy cost, nor 
would the changes increase the cost to administer the program, 
which is recorded on a cash basis. Therefore, CBO estimates 
that implementing S. 1001 would not affect discretionary 
spending. Enacting S. 1001 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    S. 1001 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Susan Willie. 
The estimate was approved by Theresa Gullo, Assistant Director 
for Budget Analysis.

                  VII. EVALUATION OF REGULATORY IMPACT

    In compliance with rule XXVI (11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                   VIII. SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    This section provides for the title, ``Small Business 
Lending Reauthorization Act of 2015''.

Section 2. General business loans authorization

    This section increases the authorized limit for general 
small business loans under 7(a) of the Small Business Act for 
fiscal year 2015 to $20,500,000,000 and for fiscal year 2016 to 
$23,500,000,000.
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