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Senator Scott, Colleagues Introduce Bill to Stop Government Overreach in Small Business Lending

WASHINGTON — Today, U.S. Senator Tim Scott (R-S.C.) reintroduced the Protecting Access to Credit for Small Businesses Act to protect community banks and credit unions from competing with the federal government by prohibiting a Biden-era rule that would allow the Small Business Administration (SBA) to directly making loans. 

Sens. John Barrasso (R-Wyo.), Ted Budd (R-N.C.), Kevin Cramer (R-N.D.), Mike Crapo (R-Idaho), Steve Daines (R-Mont.), Cindy Hyde-Smith (R-Miss.), James Risch (R-Idaho), and Rick Scott (R-Fla.) are co-sponsoring this bill.

“The SBA has a poor track record as a direct lender, especially compared to local banks that know the communities they serve,” said Sen. Tim Scott. “Allowing the SBA to directly offer loans is not just another example of government overreach, it would also hurt Main Street by creating unnecessary competition with community banks and credit unions. The private sector has a much stronger record of managing loans effectively, and the last thing we need is big government disrupting a system that local businesses rely on.”

Sen. Barrasso said, “Wyoming’s community banks and credit unions know our local small businesses better than unelected, unaccountable Washington bureaucrats. The Biden administration tried to push direct government lending to undermine these partnerships. The Protecting Access to Credit for Small Businesses Act prioritizes local lenders and ensures Wyoming small businesses get the credit they need.”

“Time and again, the federal government has shown it is neither efficient nor effective when it comes to delivering direct loan support to small businesses. Community banks and credit unions, not Washington bureaucrats, understand the needs of the businesses they serve. It’s time we stop sidelining them. I am proud to join Senator Scott and my colleagues to put power back in the hands of local institutions that invest in our communities, rather than forcing them to compete with the federal government,” said Sen. Budd.

Sen. Cramer said, “The Biden proposal to allow the SBA to directly make loans under the 7(a) lending program undercut the private sector. Protecting access to credit for small businesses is critical and we must prevent the federal government’s blatant attempt to control the direct lending space.”

“Inserting the heavy hand of the federal government into a role community banks and credit unions already serve is redundant and wasteful,” said Sen. Crapo. “We can rely on our private institutions to help small businesses access capital without putting them in direct competition with the federal government.”

“Small businesses make up 99 percent of all businesses in Montana and the community lenders who are vital to facilitating the flow of capital to our small businesses should not be forced to compete directly with the federal government. I’m glad to join my colleagues to introduce this bill, which will unleash the full potential of the private markets and remove the improper role of the federal government in decisions best made between a bank and the businesses they serve,” said Sen. Daines.

Sen. Hyde-Smith said, “Mississippi’s small businesses play a vital role in our state’s economy, and they thrive when local lenders, who understand their communities, are leading the way. With this bill, we want to return the SBA to its traditional role as a guarantor rather than a direct lender, which will allow our private, local financial institutions to continue meeting the needs of our local entrepreneurs.”

“Access to capital remains one of the biggest challenges small businesses face,” said Sen. Risch. “The Protecting Access to Credit for Small Businesses Act stops the federal government from getting involved in a process private lenders have handled well for years, allowing small businesses to thrive without bureaucratic roadblocks.”

“Small businesses are the backbone of our economy. I’ve run businesses small and large, and I know the pressure these owners face having employees rely on them to make payroll so they can support their families. When they look to their federal government for support, they shouldn’t be subject to big government overreach, nor left without because of fraud and waste allowed by government inefficiencies,” said Sen. Rick Scott. “The Protecting Access to Credit for Small Businesses Act ensures small businesses can continue to access federal resources they need through trusted, community-based lenders that best serve their needs without more big government getting in the way.”

Rob Nichols, President and CEO, American Bankers Association said, “In partnership with banks of all sizes, the SBA’s 7(a) lending program continues to deliver critical financing to small businesses across the country. Creating a direct lending program within the SBA would duplicate and crowd out these existing private-sector efforts and threaten access to much-needed capital, and we appreciate Chairman Scott’s leadership in introducing this important bill to prevent these potential harms. We look forward to working with him to strengthen the existing 7(a) framework and ensure that private lenders can continue to perform their vital role in supporting our nation’s small businesses.”

“Financial inclusion and access to capital for entrepreneurs are critical in ensuring the growth and development of vibrant small businesses. The SBA government guaranteed lending programs, like 7(a), demonstrate successful public-private partnerships that work as borrowers can obtain loans from credit unions that they know and trust. Direct lending from the SBA would invalidate this partnership, driving up program costs and disincentivizing 7(a) Loan Program authorization within financial institutions. America’s Credit Unions is proud to protect consumer relationships by supporting Senator Tim Scott’s Protecting Access to Credit for Small Businesses Act, which seeks to prohibit the SBA from directly making loans under the 7(a) program,” said Jim Nussle, President and CEO, America’s Credit Unions.

“BPI supports this commonsense legislation that preserves the important relationship between small businesses and their banks and prevents bureaucratic inefficiency from interfering. Small businesses across the country deserve the private sector’s expertise and customer service when it comes to accessing affordable credit in order to grow,” said Erik Rust, Senior Vice President and Head of Government Affairs, Bank Policy Institute.

“The Carolinas Credit Union League fully supports Chairman Scott’s Protecting Access to Credit for Small Businesses Act,” said Dan Schline, President and CEO, Carolinas Credit Union League. “We greatly appreciate his leadership in ensuring small businesses can continue to access capital through mission-driven lenders like credit unions – institutions that truly understand and serve the unique needs of their communities, rather than relying on a one-size-fits-all approach.”

“On behalf of America’s leading Main Street banks, we commend Senator Scott for reintroducing the Protecting Access to Credit for Small Businesses Act, which rightly seeks to ensure the SBA does not engage in direct lending under the 7(a) program. Allowing the SBA to compete with private sector lenders would not only strain program resources and drive up costs, but also discourage banks from partnering with the SBA—ultimately undermining access to capital for the small businesses that need it most,” said Lindsey Johnson, President and CEO, Consumers Bankers Association.

Rebeca Romero Rainey, President and CEO, Independent Community Bankers of America said, “ICBA and the nation’s community banks thank Chairman Scott for introducing the Protecting Access to Credit for Small Businesses Act to bar the SBA from making direct loans under its 7(a) program. Given the SBA’s poor and costly track record in direct lending – including high subsidy rates and excessive instances of fraud in previous direct loan programs – ensuring the 7(a) program continues to utilize private-sector lending expertise is critical to preserving its continued success in supporting small businesses.”

“The South Carolina Bankers Association greatly appreciates Sen. Scott for introducing the Protecting Access to Credit for Small Business Act. This legislation will ensure that the proper place for lending is with banks and not the government. Everyday banks efficiently, and with deep knowledge of their customers and communities, provide critical financing for small businesses. The Small Business Administration is an important partner, but banks are ultimately best equipped to take care of their communities,” said Fred L. Green III, President and CEO, South Carolina Bankers Association.

Background

  • President Biden’s fiscal year 2025 budget included a proposal that allows the SBA to directly make loans under the 7(a) lending program.
  • The SBA has a history of performing poorly in lending programs compared to the private sector.
    • According to the SBA Office of Inspector’s 2023 report, the government-led COVID-19 Economic Injury Disaster Loan (EIDL) program had $136 billion in potential fraud (33 percent of total funds disbursed). In contrast, the private-sector-led Paycheck Protection Program (PPP) had $64 billion (8 percent of funds disbursed). 
  • Sen. Scott has continued to lead in pushing back against the Biden administration’s attempted federal overreach into the direct lending space, including:
    • Introducing the Protecting Access to Credit for Small Business Act in the 117th and 118th Congress with Senator John Kennedy (R-La); 
    • Sending a letter to Senate Majority Leader Chuck Schumer, then-Speaker Nancy Pelosi, and then-House and Senate Small Business Committee Chairs Ben Cardin and Nydia Velázquez warning against their plan to make the SBA a direct lender through the Democrats’ reckless tax and spending bill.  

Endorsements

This bill is supported by: 

  • American Bankers Association 
  • America’s Credit Unions 
  • Bank Policy Institute 
  • Carolinas Credit Union League 
  • Consumer Bankers Association 
  • Independent Community Bankers of America 
  • South Carolina Bankers Association. 

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