Nydia Velázquez Presses SBA to Change Lending Rule for Employee-Owned Firms
The Small Business Administration (SBA) recently enacted provisions to help small firms transition into an employee-owned business. However, Congresswoman Nydia Velázquez (D-NY) is sounding the alarm over the way the rules are being drafted saying they could create additional barriers. As the top Democrat on the House Small Business Committee, she and Senator Kirsten Gillibrand (D-NY) have written the SBA Administrator Linda McMahon expressing concerns that their proposed rule would prevent loans for employee-owned business models from being processed under “delegated authority” from SBA’s lenders arguing it runs counter to Congressional intent and would needlessly make it harder for employee-owned businesses to access SBA loans. “That simply means more red tape, fewer loans and slower processing times,” Velázquez said. Nearly half of all privately-held businesses in the U.S. are owned by individuals who are at or near retirement age, representing more than 2.3 million companies, and employing close to 25 million workers (one in six workers nationwide). Though more than half of these small business owners expect to retire within the next ten years, fewer than 15% have a formal exit plan in place. As a result, many of these businesses could be bought out by competitors or even close due to a lack of planning or inability to find a buyer; both of which result in damage to local communities from lost jobs and revenue. “As this trend accelerates in the coming years, it is crucial that those small business employees be empowered to transition the business to an employee-owned model, preserving the firm’s independence and protecting it from the risk of decline, buyout, or outright closure,” the lawmakers write. Read the full letter here.