One year ago this week, I took my oath to lead the U.S. Small Business Administration (SBA), the federal agency chartered by Congress in 1953 to support America's entrepreneurs.
Our country was founded by fearless pioneers who crossed an ocean in search of new opportunities. Nearly two and a half centuries later, this restless spirit remains in America's DNA. Ingrained into our national identity is an understanding that every new venture involves some risk. We know that entrepreneurs with great ideas and great potential often do not begin with great wealth, so they need a great government partner to embolden and support them.
I am the 24th Administrator to lead the SBA, but I'm the first community banker and SBA lender to hold this position. I joined the president's cabinet at a time when small business lending lagged behind our broader recovery. As the co-founder of a community business bank in downtown Los Angeles, I saw the small business credit crunch up close. I saw the difference SBA-backed capital could make and the transformative potential of technology to help banks make good loans to historically underserved populations.
Small business loans on the balance sheets of banks are down about 20 percent since the financial crisis. In response to this challenge, I've worked with the resourceful SBA staff to develop a modernization agenda to help SBA operate at the speed of business and get more capital out the door. Here's what we've done:
- Predictive credit scoring - Last summer, the SBA implemented a new underwriting standard to ensure capital reaches communities more equitably. Predictive credit scoring enables banks to make immediate approval decisions on smaller-dollar loans. We're putting more weight on business credit than personal credit, because we understand that many entrepreneurs made personal sacrifices during the recession to keep their business afloat. A person's race, ethnicity or gender should never impact their ability to get a small business loan; only their creditworthiness should.
- Online matchmaking - Small business lending is the next frontier for online matchmaking services. This winter, SBA launched LINC to help entrepreneurs get a date with a lender. This tool allows small business owners to go to sba.gov and fill out a short questionnaire, which is then blasted out to our lending network. Interested lenders will reply within 48 hours to arrange a meeting.
- Going paperless - We're in the process of rolling out SBA One, our transformative initiative to automate our lending application. SBA has historically relied upon fax machines and duplicative paper forms. These outdated tools are being replaced with an intuitive, online interface that auto populates necessary forms and allows digital signatures.
- Fee relief - We waived fees on loans of $150,000 and less, so small business owners on tight budgets aren't priced out of the SBA lending market.
Since implementing these reforms, many private lenders are taking a second look at SBA. We've signed up hundreds of new lenders, including many community banks and nonprofits focused on Main Street businesses and underserved communities. We've also partnered with three organizations that represent and regulate credit unions. If just 1,000 of America's 6,600 federally insured credit unions make 10 additional SBA loans of $50,000, this would boost small businesses lending by a half-billion dollars.
We've seen the biggest dividends in our ability to reach underserved entrepreneurs that rely on us the most. Women and minority entrepreneurs are three to five times more likely to receive an SBA loan than a traditional bank loan. It's important that we level the playing field for qualified borrowers, because SBA interest rates are lower than rates offered by alternative lenders.
Last year, SBA broke our record for lending under our flagship 7(a) program, supporting $19.2 billion in lending. During my tenure, we've increased our loan volume to women by 24 percent, African Americans by 33 percent, Hispanics by 20 percent, Asian Americans by 10 percent, Native Americans by 14 percent and veterans by 7 percent. I'm committed to ensuring that our agency is truly color-blind and gender-neutral.
Also, last summer the SBA announced that Uncle Sam had met its goal of awarding 23 percent of federal contracts to small businesses for the first time in eight years. That's more than $83 billion in revenue for small businesses that create two out of three net, new jobs in our economy. We also broke our record for contracts awarded to socially and economically disadvantaged businesses.
As an immigrant who came to this country at age 5 with no economic advantages, I believe that entrepreneurism is the greatest force the world has ever known for lifting people out of poverty. SBA plays a special role in empowering those born without any head start.
This week, I'll be part of President Obama's delegation at the Summit of the Americas in Panama. I'll talk about our unique system of government-backed financing and how it gives our banks the confidence to approve loans they otherwise would not. By retooling SBA for the 21st century, we can give Americans from all walks of life the opportunity to be their own boss, enter the middle class and provide a better life for their children.