Testimony of Itzel Sims before the Senate Committee on Small Business and Entrepreneurship on "Hearing From Lenders: Managing Risk For the Long Term in the 7(a) Loan Program"

Chair Ernst, Ranking Member Markey, and members of the Committee, thank you for the opportunity to offer testimony for today's Hearing: "Hearing from Lenders: Managing Risk for the Long-Term in the 7(a) Loan Program." My name is Itzel Sims, and I am Director of Small Business Administration (SBA) Lending for First Security Bank, a community bank located in Searcy, Arkansas.

Small businesses are the backbone of the American economy. The Small Business Administration's 7(a) Program helps small businesses that might not otherwise have access to capital obtain loans, so that they can grow and create jobs. Now in my 26th year making loans to small businesses, I am proud of the work that my colleagues at First Security and I do to assist businesses across Arkansas with 7(a) and other small business loans. I am very pleased to present this testimony on behalf of First Security and the American Bankers Association (ABA).

My work with SBA lending has spanned four institutions, giving me a broad perspective regarding the challenges and opportunities presented by the 7(a) Program. I began my career at Arkansas Capital Corporation, an Arkansas nonprofit, nonbank lender that specializes in government guaranteed lending. In 2015, Regions Bank approached me to become an SBA specialist for its Arkansas market, where I was a top producer of SBA loans. In 2019, I pursued an opening as SBA Regional Manager for Simmons Bank, a midsize bank located in Pine Bluff, Arkansas. In that role, I managed the origination and closing process across six states.

In 2021, I joined First Security, a privately-held community bank that has among the most complete and diverse product offerings of any Arkansas-based financial services holding company. With $1.5 billion in total capital, $8.13 billion in assets, and 1,000 employees covering locations throughout Arkansas, First Security offers solutions for the financial needs of small businesses, as well as individuals and the public sector. In my four years with First Security, I have created a new SBA lending platform for SBA 7(a), SBA Express, and SBA 504 loans. During this time, First Security has been ranked as a top-10 SBA lender in the State of Arkansas.

I am a strong proponent of SBA's loan programs because, in each of the positions I have held, I have helped small business loan applicants that had strong business plans, drive, and determination – but who could not meet underwriting requirements for commercial loans due to risk, seasonality of the business, or lack of collateral. And by applying prudent underwriting, I and other SBA lenders have helped the SBA achieve its goal of a "zero subsidy rate" for its 7(a) Program in 10 out of 16 years between Fiscal Year 2007 and 2022 – i.e., the Program generated sufficient revenue through fee collections and recoveries of collateral on defaulted loans to not require an appropriation from Congress.

Today's hearing comes at an opportune time. Two years ago, SBA lifted the moratorium on the number of nonbank lenders that could participate in the 7(a) Program while simultaneously loosening underwriting standards for these loans. Available data indicate that the Program has experienced increased defaults since those changes went into effect, particularly in loans originated by nonbank lenders. As SBA considers reforms, this Committee can play an important role in strengthening the Program so that all lenders make 7(a) loans in a safe and sound manner to help small businesses gain access to needed capital to grow their business.

Download the testimony to read the full text.