Two Executives from ABA Member Banks Testify at Senate Hearing on SBA Lending Program

Two community bankers from American Bankers Association member banks will share their knowledge and lending expertise today at a hearing of the U.S. Senate Committee on Small Business and Entrepreneurship titled “Hearing from Lenders: Managing Risk for the Long-Term in the 7(a) Loan Program.” The 7(a) program is a Small Business Administration (SBA) loan guarantee program designed to encourage lenders to provide loans to small businesses that might not otherwise have access to financing.

Itzel Sims, director of SBA lending for First Security Bank, a community bank in Searcy, Ark., will testify on behalf of her bank, the Arkansas Bankers Association and ABA. Additionally, Tim Fitzgibbon, senior vice president with First National Bank, an Ames, Iowa-based community bank, will testify on behalf of his institution and the Iowa Bankers Association. First National Bank is also an ABA member. 

In her prepared testimony, Sims affirms ABA’s support for the SBA’s efforts to expand credit access for small businesses and offers several recommendations to ensure that the 7(a) program remains financially stable while removing barriers to efficient and effective loan-making. She also urges Congress to repeal section 1071 of the Dodd-Frank Act, noting that while ABA supports the goals of enforcing fair lending laws and identifying opportunities for community development, section 1071 and the CFPB’s implementing regulation “will make it harder for banks to serve small business customers.”

“We appreciate the Committee’s attention to how it can work with SBA to strengthen the 7(a) Program and to facilitate small business lending more broadly,” Sims says in her testimony. “We urge SBA to impose stronger underwriting standards on 7(a) loans, not grant additional SBLC licenses without a demonstrated need and without showing that the agency can effectively supervise new entrants, and improve the efficiency of the 7(a) Program by reinstating the franchise directory. We also ask the Committee and Congress to repeal section 1071 of the Dodd-Frank Act. With these changes, the Committee can strengthen small business lending and enhance the ability of banks to make these critical loans that drive economic growth in our nation’s communities.”

In his prepared testimony, Fitzgibbon highlights concerns stemming from the SBA’s 2023 decision to reduce underwriting standards and urges the SBA to “closely monitor the impact of its reduced underwriting standards on the borrowers it serves.”

“Risk in any loan program is primarily managed through sound underwriting policies,” Fitzgibbon says. “Prudent underwriting ensures equitable treatment for all applicants and is intended to be a good predictor of a borrower’s future success. In short, good underwriting protects the consumer along with the lender, and in the case of the government backed SBA program, the taxpayer as well.”

He also offers caution about the prospect of the SBA restarting its direct government lending program, noting that “[h]istory has shown that direct government lending can lead to expensive loan modifications, and even debt forgiveness, to mask nonperforming loans. Loan forgiveness does not manage debt, it simply passes the costs on to the taxpayer.”

Read Sims’ full testimony.

Read Fitzgibbon’s full testimony.