EXCLUSIVE: Republican lawmakers on Wednesday blasted Democratic leaders for including a provision in their reconciliation bill that would allocate billions to the Small Business Administration for direct loans, calling it an “expensive” way to get loans into their hands small businesses.
In a letter to Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi, 15 GOP senators – led by Senator Tim Scott of South Carolina – sounded the alarm over the authorization nearly $ 4.5 billion over the next decade for the SBA to directly issue the popular 7 (a) loans and $ 2.8 billion for 504 loans in the spending and tax bill $ 3.5 trillion from Democrats.
Under this measure, small business owners could go directly to the SBA for access to capital, rather than to private lenders and banks.
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“We believe it would be an ineffective, costly and unfair position to bring both lenders and borrowers down,” the Republicans wrote in the letter, which is also addressed to Democratic small business presidents.
GOP lawmakers cited the large gap between the issuance of Paycheck Protection Program loans, which were administered by banks and other private institutions, and economic disaster loans, which were administered by the SBA.
For example, in FY2020, the SBA approved 42,402 7 (a) loans worth approximately $ 22.6 billion through 1,673 lending partners, in addition to approximately 12 million loans. PPP valued at approximately $ 800 billion through 5,467 different lenders. Republicans hailed the partnership between the SBA and private lenders as “overwhelmingly successful” in raising money for small businesses struggling due to the pandemic.
But they highlighted the high rate of fraud in the SBA’s direct processing of EIDL loans: the SBA Inspector General recently uncovered $ 78.1 billion in potentially fraudulent EIDL activity; At the same time, the SBA had, by mid-September, disbursed $ 290 billion in COVID-19 EIDL loans and grants – meaning the fraud rate could reach 30%.
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For comparison, the potential fraud rate for PPP loans is estimated to be around 4.6%. Senators noted that PPP loans depended on banks, credit unions, fintechs, and other private sector lenders, while the EIDL program was run entirely by the government.
“This misguided Liberal plan would take taxes from small business owners and then lend them to them at interest,” Scott said in a statement to FOX Business. “It doesn’t make sense. The private sector is just much more efficient at running these programs than big government. It’s yet another part of the Democrats’ massive plan to put government in control of virtually every aspect of it. American life. “
Democrats argued that the measure is intended to help founders of small businesses who have been “left behind” by the PPP – a vital lifeline during the pandemic – because they lacked banking relationships or their banks prioritized larger, more profitable loans.
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But Republicans countered that the reconciliation bill should instead expand the pool of lenders in the 7 (a) program – giving borrowers more options – rather than “giving the SBA the reins to run its own.” loan program, “which could” make it more difficult for lenders to participate and potential lenders at the event want to join the program. “
“As the United States emerges from the COVID-19 pandemic, growing small businesses and entrepreneurship must be a top priority,” the letter said. “Unfortunately, under the reconciliation legislation currently under consideration, among other provisions, allowing the SBA to establish and manage a loan program that it regulates itself will hurt job creators and businesses. United States as a whole. “
Fox News’ Andrew Murray contributed to this report