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NEWS RELEASE
June 10, 2009
ABA Media Contact: John Hall
(202) 663-5473
E-mail: jhall@aba.com

WASHINGTON – In testimony today before the House Small Business Committee, the American Bankers Association urged the Small Business Administration to enhance programs for community banks, increase the efficiency of loan guarantee collections and expand the role of regional SBA loan offices. 

While commending the Administration and Congress for addressing the concerns of small businesses, ABA suggested more could be done to benefit local economies.

"For banks like mine, small businesses are our bread and butter," said Michael McGannon, senior vice president and chief lending officer, Country Club Bank, Kansas City.  "Even with the economy faltering and individuals and businesses reducing their borrowing, banks continue to lend. 

"One thing that has clearly happened is that banks are looking carefully at the risk of a loan and re-evaluating the proper pricing of that risk.  This is a prudent business practice and one expected by our bank regulators."

Noting that the SBA's flagship 7(a) loan guarantee program declined in volume by 30 percent last year, McGannon suggested that part of this decline is due to SBA programs becoming too costly and difficult for lenders and small businesses who want to access the program.

McGannon praised the committee for the small business provisions in the Recovery Act, but mentioned that these opportunities will be difficult to implement unless SBA makes some suggested changes.  

"Most small community banks are intimidated by the amount of paperwork required for a regular SBA 7(a) loan.  In the past, SBA had a product in which there was a two-page application for the bank to complete and had an 80 percent guaranty," said McGannon.  "This program has been eliminated."

McGannon recommended that the SBA should reduce the time it takes for participating banks to collect on loan guarantees.  He noted that the time frame for collections is sporadic and that banks sometimes need to resubmit documention because they have been lost by SBA.

"There is near universal agreement in the lending community that efforts to collect on the loan guarantee form SBA can be a time-consuming and costly process," he said.

McGannon commended the knowledgeable staff of the SBA office in his hometown, and reiterated that these relationships are vital to keep up with changes in SBA regulations.

"Banks in outlying areas do not have the benefit of a local SBA office that understands them, their clients or their town.  Instead they have to contact someone at a 1-800 number to get answers to questions.  It is critical that the SBA returns to a model of helping local small businesses and banks through off-site training programs that can tend to the needs of the lending partnership," said McGannon.

[Read McGannon's complete testimony]

The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America's economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry's $12.7 trillion in assets and employ over 2 million men and women.
                                                                            
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