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Small business owners may be affected by the ongoing criticism aimed at the Small Business Administration (SBA) over its lending policies. U.S. Senator Joni Ernst (R-Iowa), Ranking Member of the Senate Small Business Committee, has accused the SBA of moving forward with significant changes to their lending programs, despite bipartisan worries about potential increased risks and loosened underwriting standards.
Ernst stated, “In spite of a bipartisan push for the SBA to exercise diligence and restraint, the SBA has ignored Congress – specifically this committee – every step of the process and is moving full speed ahead.” She made it clear that a bipartisan agreement needs to be reached concerning these rules prior to addressing other aspects of modernizing the SBA. “Small business lending is the foundation of SBA’s programs, and we can’t undertake renovations to the rest of the Agency until this dire problem is fixed,” she added.
Small businesses rely heavily on SBA’s lending programs for funding, and changes to these programs could impact their ability to obtain necessary financing. Ernst’s concerns center around the potential for fraud, predatory lending practices, and other vulnerabilities following the proposed changes.
Ernst raised questions during a Senate Small Business Committee hearing, focusing on SBA Associate Administrator Patrick Kelley’s role in the SBA’s rule-making process. Ernst also addressed the possibility of the SBA clearing billions of dollars in pandemic recoveries, an idea that has raised concern among many lawmakers. The SBA Deputy Inspector General also reportedly agreed with her concerns.
Earlier this year, Ernst, alongside Committee Chairman Ben Cardin (D-Md.), requested the SBA reconsider its changes to loan underwriting that allow an unlimited number of non-bank financial technology companies, or “fintechs,” to participate as lenders. These entities were responsible for issuing billions of dollars worth of fraudulent Paycheck Protection Program (PPP) loans.
In April, Ernst called on the SBA to continue collections on nearly $72 billion of taxpayer-funded COVID loans. Small business owners who took advantage of these loans should be aware of potential changes in collection policies that may affect their obligations.
While the implications of these changes are yet to be fully understood, small business owners should keep an eye on the evolving situation. The SBA’s loan programs are critical to many small businesses, and any changes could significantly impact their operations.
As we navigate these developments, maintaining an open dialogue about the potential risks and benefits of the proposed changes is critical for all stakeholders. Small business owners should engage with their local representatives and stay updated on these changes, which could affect their ability to secure future financing.
This unfolding situation emphasizes the importance of oversight in government agencies and the need for transparency in decision-making processes. Small businesses, the backbone of the American economy, depend on stable and fair lending practices to thrive.
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