Senate Committee on Small Business & Entrepreneurship Ranking Member Ben Cardin (D-Md.) introduced the Small-Dollar and Veterans Loans Enhancement Act – legislation to increase lending to underserved borrowers by eliminating or reducing fees on Small Business Administration (SBA) 7(a) small-dollar loans of $150,000 or less, the majority of which finance women-, minority- and veteran-owned and rural small businesses.

The majority of 7(a) loans that go to underserved communities are less than $150,000. In fiscal 2018:
• 62% of the loans that went to women-owned firms were for loans of $150,000 or less;
• 55% of the loans that went to American Indian-owned firms were for loans of $150,000 or less;
• 65% of the loans that went to Hispanic-owned firms were for loans of $150,000 or less; and
• 65% of the loans that went to Black-owned firms were for loans of $150,000 or less.

Under current law, SBA must operate the 7(a) Loan program at “zero subsidy,” which requires the administration to offset any projected costs for backing 7(a) loans with fees on borrowers and lenders. When the administration projects that 7(a) will operate with a surplus, SBA is required to reduce fees “to the maximum extent possible” on 7(a) Express loans to veterans, as well as other borrowers.

Since 2013, the agency has had sufficient surplus income to waive fees on loans to veterans in the Express Loan program, as well as on loans up to $150,000 for borrowers and sometimes lenders.

The fees required for small-dollar loans can be as high as $2,550 on a $150,000 loan, which for entrepreneurs in underserved communities can be a barrier to needed financing, considering the stark racial and gender wealth gaps. According to the Federal Reserve, Black families have $17,150 in wealth and Hispanic families have $20,720 in wealth, while White families have $171,000 in wealth. Similarly, a 2017 report found that women have $3 in wealth for every $10 men have.