IFA Franchise Association : SBA Administrator Testifies Before Congress, Tells of Progress in Assisting Small Business Owners

On Thursday, Jan. 7, the House Committee on Small Business held a hearing on the status of the U.S. Small Business Administration (SBA), and heard testimony from SBA Administrator Maria Contreras-Sweet as the lone witness. Although the hearing was convened to address a recent report by the Government Accountability Office (GAO) that criticized the SBA for its failure to implement management recommendations dating back several decades, the Administrator took the opportunity to highlight the areas where SBA has succeeded in serving America's small business and helping them continue to grow the economy.

In her testimony, Administrator Contreras-Sweet emphasized that, despite the criticism from the GAO and the Committee, FY 2015 was one of the most successful years in the history of the agency. SBA backed 22 percent more loans to American small businesses, with a 23 percent increase in the dollar value of those loans compared to FY 2014. Although lending to small businesses has increased in the years since the recession, she said, it has only returned to 84 percent of its pre-recession level, making the SBA's role in helping small businesses secure vital financing even more important. In addition, Contreras-Sweet shared that loan approvals to women in the flagship 7(a) loan program increased 29 percent over 2014, while loan approvals to minorities increased 27 percent and those to veterans increased 47 percent. All of this progress, the Administrator noted, occurred while the 7(a) program has operated at zero-subsidy, with no direct cost to taxpayers.

The well-established 7(a) program is paramount in ensuring that qualified small businesses, especially franchise businesses, are able to survive and increase their production in a fragile economy. In 2014 alone, SBA lending programs were used in the financing of nearly 30,000 new franchised units and guaranteed an estimated $6 billion in loans to new and prospective franchisees. That number is likely to increase since SBA lending for the 7(a) program increased by 23 percent in 2015. In 2015, nearly a quarter of all new single-unit franchises were financed with the help of SBA loan guarantees, with 17 percent of medium-sized multi-unit franchisees and 19 percent of large multi-unit franchisees utilizing SBA-guaranteed loans to expand their operations. According to IFA estimates, for every $1 million in lending to a franchise, 40 new direct and indirect jobs are created. These figures show that SBA loan programs are a vital lifeline to franchises and other small businesses as the small business lending market continues its recovery.

Although the Administrator focused on many of the agency's high points, the Committee members sought clarification on the Administrator's plans to address management deficiencies in cybersecurity, staff retention, and disaster relief programs. Committee Chairman Steve Chabot (R-OH) pressed the Administrator for a commitment to addressing the GAO report's recommendations, explaining that 62 of the GAO's 69 recommendations have not been implemented.

IFA submitted a statement for the hearing record praising the SBA for its essential loan programs, while stressing the need for continued recognition of the needs of small business owners in the U.S. Congress. The Committee will continue with its series of hearings on the oversight of the SBA this week. SBA Associate Administrator of Capital Access Ann Marie Mehlum and Linda Rusche, Director of the Office of Credit Risk Management will testify on the status and management of the SBA's capital access programs tomorrow at 10:00am ET. For more information on last week's hearing, or for more information on this week's activity, click here.