Initiative Would Reinvigorate Investment in Small Businesses
Washington, DC — The U.S. House of Representatives this week passed the “Small Business Lending Fund (SBLF) Act,” H.R. 5297, by a vote of 241-182. The legislation will aid small businesses in securing capital through new community bank incentives, support for state lending initiatives and by opening venture capital markets to small businesses.
“As our most prolific job creators, small businesses will be central to the recovery of the U.S. economy,” said Rep. Nydia M. Velazquez, the Chairwoman of the House Committee on Small Business. “However, for entrepreneurs to expand and create jobs, they need access to financing. The measure we approved today will make both credit and equity capital available for small firms.”While the legislation would establish a new $30 billion lending fund for community banks, which proponents say would provide $300 billion in lending to entrepreneurs, key changes were made during debate of the bill to ensure Main Street businesses benefit from the legislation. Rep. Glenn Nye (D-VA) authored safeguards in the bill that will require banks to substantially boost their small business lending to qualify for funds. To further assist small firms, language prepared by Rep. Kurt Schrader (D-OR) would establish a new borrower assistance program, providing additional funds to small businesses who take out loans. The funds can be used at the entrepreneur’s discretion to reduce their interest rates, defer their loan or cover monthly payments.
“Since the onset of the financial crisis, much has been done to shore up our nation’s banks, but entrepreneurs’ needs have gone unmet,” Velazquez said. “These amendments will make sure that small businesses benefit from the current proposal and I thank Mr. Nye and Mr. Schrader for offering them.”
With the capital markets evolving, small businesses are increasingly looking beyond debt financing to equity capital to meet their financing needs. While entrepreneurs have traditionally used assets like real estate to secure loans, more and more business owners today seek financing based on strengths like their scientific expertise, research technologies, and potential for commercialization. For these firms, investment capital is a better financing solution. To account for these economic changes, the legislation contains provisions aimed at reinvigorating investment in small startups. By establishing a new “Small Business Early Stage Investment program,” funds from the SBA will be paired with private capital to invest in small startups.
“In a world where revolutionary new products are conceived in dorm rooms and companies are born in garages, we need new ways of meeting businesses’ capital needs,” said Velazquez. “The Small Business Early Stage Investment program recognizes this fundamental shift, taking steps to meet the capital needs of new businesses and helping them create jobs.”