Lafayette Reporter

Sen. John Kennedy and Sen. Tim Scott have introduced the Protecting Access to Credit for Small Businesses Act, a bill aimed at preventing the Biden administration from using the Small Business Administration (SBA) as a direct lender for the 7(a) Loan Program.

Kennedy expressed his concerns, stating, "Fraud and inefficiency characterize the Small Business Administration’s history in direct lending. The government shouldn’t crowd out private lenders that are already doing a good job getting funds to the small businesses that need them."

Similarly, Scott emphasized the risks of the administration's proposal, saying, "When acting as a direct lender, the SBA has a consistent history of failure and inefficiency when compared to the private sector. The administration’s proposal is just a vehicle for a big government overreach into nearly all aspects of American life and private institutions."

The bill aims to block the SBA from issuing direct 7(a) loans and competing with small lenders, who currently work with small businesses to provide loans through the program.

President Biden's 2025 budget request includes a proposal for a small-dollar lending program that would allow the SBA to issue 7(a) program loans directly, potentially disrupting the current system where small business owners work with private lenders in their communities.

In response to this, Kennedy, Scott, and other Republicans have raised concerns about the government's track record in developing lending programs. They highlighted the SBA's Inspector General's estimation that the government-run Economic Injury Disaster Loan (EIDL) program issued $79 billion in fraudulent loans during the pandemic.

Private lenders, on the other hand, have shown greater efficiency and safety in distributing loans to small businesses. For example, under the Paycheck Protection Program (PPP), private banks distributed $800 billion in loans to nearly 12 million small businesses, with fewer than 1% of accounts identified as potentially fraudulent by fraud experts.

The Protecting Access to Credit for Small Businesses Act has garnered bipartisan support, with Senators Jim Risch, Kevin Cramer, Chuck Grassley, Steve Daines, James Lankford, Joni Ernst, John Cornyn, Ted Budd, Tom Cotton, Rick Scott, and Mike Braun cosponsoring the legislation.