Today, the Financial Services Committee held a hearing on legislation introduced by Rep. Ed Royce (R-CA), the Small Business Lending Enhancement Act (H.R. 1418). The legislation provides much needed financing for small businesses without spending a single tax dollar. Rep. Royce, a senior member of the House Financial Services Committee, issued the following statement during the hearing:

I have introduced the Small Business Lending Enhancement Act with one goal in mind: expand access to credit for creditworthy borrowers.

Given some of the recent reports, it appears this is an issue. According to an article in the Wall Street Journal titled "Smaller Businesses Seeking Loans Still Come Up Empty," loans outstanding to small businesses totaled $609 billion at the end of March – an 8.6% drop from a year earlier.

Further, an October report by the New York Federal Reserve said that three-quarters of small businesses looking for credit in the summer of 2010 were turned down or received only some of the financing that they requested.

This restriction of credit comes at a time when small businesses thought they were out of the woods.

Unlike previous iterations, this bill is not a blanket increase in the member business lending cap. In order to qualify, a credit union must be well capitalized, have at least a 5 year history of sound member business lending experience, be operating at or near the cap for at least a year and receive the approval of their regulator, the NCUA.

It is also worth noting that this plan differs from other job proposals we have seen lately from the Administration. Whether it was the trillion dollar stimulus bill that failed to meet expectations or the recently created SBLF program. Last week the Wall Street Journal reported that of the $4 billion dispersed by Treasury through SBLF, over half has been come back to the Treasury in the form of TARP repayments. One participant even labeled it a "shell game."

Our legislation, on the other hand, can have a stimulative effect but does not call for additional government spending. It a small attempt to free up capital that is currently sitting on the sidelines. Economists say it will allow up to $13 billion to be lent to small businesses which in turn could create 140,000 jobs.

In closing, I don’t believe this legislation will be a cure-all, but I believe it is an idea worth considering given the current state of the economy.

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