North Lancaster News

WASHINGTON, D.C.— Last week, the House Small Business Committee passed H.R. 1644, the Small Business 7(a) Loan Agent Oversight Act, which was introduced by Congressman Dan Meuser (PA-09). The legislation passed in committee with unanimous bipartisan support.

The bill requires the Small Business Administration (SBA) Office of Credit Risk Management (OCRM) to submit an annual report to Congress regarding the performance of and risk associated with loans generated through loan agent activity.

The SBA’s Inspector General has reported that nearly 15 percent of all 7(a) loans include a loan agent. Unfortunately, the OIG has also reported that over the last decade there has been more than $335 million in documented loan agent fraud.

The bill will ensure that Congress receives the data it needs to conduct proper oversight of the SBA’s flagship loan program. It will provide information on how many loans have been processed with the assistance of loan agents and default rates of loans that are associated with the loan agents. Additionally, the legislation requires the SBA to perform a risk analysis on agents who operate within the program.

"Access to capital for entrepreneurs is the number one growth inhibitor, and the SBA’s 7(a) Loan Program needs to be efficient and stable. Unfortunately, the SBA's Office of Inspector General has highlighted the need for improved oversight of 7(a) loan agents due to increased risk of fraud associated with these agents," said Congressman Dan Meuser. "My bill will address these issues by requiring the SBA to develop and publish an annual portfolio risk analysis for Congress on loan agents that operate within the program. This analysis will ensure that both Congress and the SBA remain good stewards of taxpayer dollars and ensure that American small businesses can continue to benefit from the SBA's flagship loan program."

“The 7(a) Loan Program is an invaluable resource for small businesses owners who would otherwise be left without access to capital,” said Congressman Dean Phillips. “As the role third party loan agents play in connecting small businesses with 7(a) lenders continues to grow, we must ensure the SBA’s Office of Credit Risk Management maintains diligent oversight over intermediaries. Our bipartisan legislation will ensure that oversight occurs and is reported to Congress. Understanding the impacts and potential risks of loan agent activity within the 7(a) portfolio will strengthen the SBA’s flagship lending program, and in turn, protect the interests of small businesses across our nation.”

In FY22, SBA's 7(a) loan program facilitated approximately 47,700 7(a) loans totaling $25.7 billion. The loan program is considered the flagship program at SBA. It provides creditworthy small businesses that cannot obtain credit elsewhere the opportunity to access capital from private lenders. SBA does not offer direct lending to small businesses; rather, SBA guarantees the repayment of loans issued by lenders for general business purposes.

The Small Business Committee also passed H.R. 1651, the Small Business 7(a) Loan Agent Transparency Act – the companion bill to 7(a) Loan Agent Oversight Act. H.R. 1651 was introduced by Congressman Dean Phillips (D-MN) and was cosponsored by Congressman Meuser. The legislation requires the SBA to establish a registration system for 7(a) agents that assigns each agent a unique identifier and collects data to help the SBA track and evaluate loan performance for loans generated through loan agent activity. Under the bill, the SBA will establish a database with the type of services performed by loan agents & require their registration before an agent provides services to a lender or borrower.

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Original source can be found here.