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Monday, November 1, 2010

Small Business Legislation During the 111th Congress

Robert Jay Dilger
Senior Specialist in American National Government

Oscar R. Gonzales
Analyst in Economic Development Policy

Gary Guenther
Analyst in Public Finance

Congressional interest in assisting small business has increased in recent years primarily due to continuing concerns about unemployment and the sustainability and robustness of the current economic recovery. In the past, small business has typically led job formation during economic recoveries. However, there has been increased concern in Congress that small businesses might be prevented from accessing sufficient capital to enable them to take on that job creation role during the current recovery. Financial institutions have tightened their lending standards and, in 2008 and early 2009, there were major disruptions of business credit markets that made it difficult, and in some instances impossible, for financial institutions to sell their loans on the secondary market.

Since 2009, business credit markets have improved and most financial institutions report that they are no longer tightening their small business lending standards. However, the Federal Reserve Board notes that those lending standards “remain quite stringent.”

Congressional efforts to assist small business have focused on tax relief, enhancing small business access to capital, and amending the Small Business Act to authorize changes to the Small Business Administration (SBA). The SBA administers several programs to support small businesses, including loan guaranty programs to enhance small business access to capital; programs to increase small business opportunities in federal contracting; direct loans for businesses, homeowners, and renters to assist their recovery from natural disasters; and access to entrepreneurial education to assist with business formation and expansion.

This report examines three legislative measures considered during the 111
th Congress that were designed to assist small business: (1) H.R. 3854, the Small Business Financing and Investment Act of 2009, which would have authorized several new SBA programs and modified others; (2) the House-passed version of H.R. 5297, the Small Business Jobs and Credit Act of 2010 (initially titled the Small Business Lending Fund Act of 2010), which would have authorized four new small business lending programs, provided about $3.8 billion in tax relief for small businesses over 10 years, and included several revenue raising provisions to offset the bill’s cost; and (3) the Senate-passed version of H.R. 5297, which became P.L. 111-240, the Small Business Jobs Act of 2010. The act authorizes the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund to encourage community banks to provide small business loans, a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs, and about $12 billion in tax relief for small businesses. It also includes revenue raising provisions to offset the act’s cost and authorizes changes to the SBA’s loan guaranty, export promotion and contracting programs.

This report includes a discussion of the major provisions in each of these legislative measures, noting the key differences among them. A side-by-side comparison of the major provisions in H.R. 3854, the House-passed version of H.R. 5297, and the Senate-passed version of H.R. 5297, which became P.L. 111-240, are also presented in a table in the Appendix.

Date of Report: October 12, 2010
Number of Pages: 52
Order Number: R41385
Price: $29.95

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