U.S. Senators Jim Risch and Mike Crapo of Idaho, along with Senator Tim Scott of South Carolina, have introduced the Protecting Access to Credit for Small Businesses Act. The bill aims to prevent a recent federal rule that would allow the Small Business Administration (SBA) to compete directly with private lenders in issuing loans to small businesses.
The proposed legislation seeks to maintain the SBA’s traditional model, where private financial institutions are the primary source of lending for entrepreneurs. Supporters argue this approach enables local banks and credit unions to better serve their communities without government interference.
“Access to capital remains one of the biggest challenges small businesses face,” said 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.”
“Inserting the heavy hand of the federal government into a role community banks and credit unions already serve is redundant and wasteful,” said Crapo. “We can rely on our private institutions to help small businesses access capital without putting them in direct competition with the federal government.”
“The SBA has a poor track record as a direct lender, especially compared to local banks that know the communities they serve,” said 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.”
Additional sponsors include Senators John Barrasso, Ted Budd, Kevin Cramer, Steve Daines, Cindy Hyde-Smith, and Rick Scott.
President Biden’s fiscal year 2025 budget includes language that would permit the SBA to make loans directly under its 7(a) lending program. In past comparisons between public- and private-sector loan programs during COVID-19 relief efforts, oversight reports found that about $136 billion—representing roughly 33% of funds disbursed—were potentially fraudulent under the government-run Economic Injury Disaster Loan program. By contrast, potential fraud in the Paycheck Protection Program managed through private lenders was estimated at $64 billion or about 8% of distributed funds.
