Small Business Administration Relaxes Lending Rules
The Small Business Administration is streamlining its lending process, according to The Wall Street Journal (subscription).
What’s going on: “The Small Business Administration is simplifying loan requirements, automating more of the process and expanding the pool of nonbank lenders licensed to issue SBA loans. The moves, many of which take effect Aug. 1, will make it easier for financial-technology firms to participate.”
- The goal: to increase credit extended to small businesses that have typically struggled to get it.
The concern: “[T]he changes—and the decision to couple relaxed requirements with new lenders—have drawn criticism from the industry and members of Congress, who say the revisions could jeopardize the program by increasing loan defaults.”
- Some worry that without “firm guardrails from the SBA” lenders will make risky loans, resulting in more defaults.
- Even if defaults don’t increase, loans could get more expensive for borrowers, as lenders will now be able to charge flat fees.
Why it’s important: “The SBA is authorized by Congress to guarantee as much as $34 billion in loans annually through its main lending program” but qualifying for the funds requires adhering to a set of burdensome rules—and that’s led to underutilization of available funds, according to the Journal.
The changes: “Under the new SBA rules, lenders can use their own standard credit policies to make SBA loans of as much as $500,000 instead of following government guidelines. Lenders are encouraged to check a box to indicate why borrowers can’t get credit elsewhere, a crucial program requirement, instead of providing a detailed written explanation.”
- Revisions to the loan requirements include reduced or eliminated downpayments for some borrowers.
Timmons on Regulations: Make Them “Sensible and Achievable”
“There are good things coming from [the Biden] administration”—including the CHIPS and Science Act and historic infrastructure investment—but there are also several trends that spell trouble for manufacturing in the U.S., NAM President and CEO Jay Timmons said on CNBC’s “Squawk Box” on Monday.
A three-fold issue: “On the one hand we have a manufacturing strategy that Congress and the administration have been putting forward, which is … to prioritize growing manufacturing here in the United States,” Timmons told CNBC’s Andrew Ross Sorkin.
- “But … you’re compounding that with three things. One is the [number] of regulations coming down. … [Two is] slow permitting, which is making it difficult for manufacturers to build those facilities they’re willing to invest in. Thirdly, [in] some of the provisions that have been enacted, there’s been confusing guidance or no guidance when it comes to accessing the funds and credits that are available for manufacturing. All three of those things together are making it very difficult for manufacturers to compete and succeed in our global economy.”
- The NAM is engaging on approximately 100 different regulations coming from 30 different government agencies, Timmons added.
Make regulation smart, achievable: Manufacturers are in favor of reasonable regulations that enable them to succeed, Timmons continued. “We’re not saying ‘No regulation’; we’ve never said that. What we’re saying is, ‘Let’s make these regulations essential, smart and achievable.’”
- He cited the National Highway Traffic Safety Administration’s new Corporate Average Fuel Economy Standards—which the NAM has told the administration are unworkably stringent and will drive up costs for manufacturers—as well as the Environmental Protection Agency’s new standards for ambient air quality, which a NAM-commissioned study found would threaten billions in economic activity and cost hundreds of thousands of jobs.
NAM in action: The NAM recently joined forces with members of its Council of Manufacturing Associations and the Conference of State Manufacturing Associations to launch Manufacturers for Sensible Regulations, a coalition created to address the negative effects of these federal regulations.
SEC Finalizes Cybersecurity Disclosures Rule
After an aggressive campaign by the NAM, the U.S. Securities and Exchange Commission has scaled back a damaging cybersecurity proposal that would have been deeply problematic for manufacturers. Yet, the final regulations still impose compliance burdens on publicly traded companies. Here’s what manufacturers can expect now that the rule is finalized.
The background: Last year, the SEC proposed a new set of cybersecurity disclosure requirements for public companies. The centerpiece of the rule was a mandate to disclose cybersecurity incidents to the public within four days. The proposal also would have required detailed reporting on companies’ policies and procedures for responding to cybersecurity threats.
The problem: Requiring detailed public disclosures about cybersecurity incidents and processes could provide a roadmap to potential hackers, and sharing information about ongoing incidents could compromise efforts to stop an attack.
The NAM response: The NAM urged the SEC to make commonsense adjustments to protect manufacturers from attacks and give companies the flexibility to respond to cybersecurity incidents appropriately.
The result: The final rule is more tailored than the initial proposal, reducing the risk that companies will be forced to expose sensitive information. But its requirements still impose new compliance burdens on manufacturers.
Incident reports: The rule still requires companies to report cybersecurity incidents publicly within four days, but companies will be able to request that the attorney general grant a 30-day extension to protect public safety or national security—a top priority for the NAM. The extension could be lengthened by an additional 30 days (for public safety) or 90 days (for national security) if warranted.
- Thanks to the NAM’s intervention, the SEC will require the disclosure of only limited information about an attack’s circumstances and impact, whereas the original proposal would have forced companies to disclose extensive details, including potentially sensitive data.
- In addition, a provision requiring companies to track, aggregate and disclose the impact of minor cybersecurity incidents—which the NAM opposed—was struck from the final rule.
Risk management and governance: Companies will be required to disclose information on cybersecurity oversight by their board and management, as well as how cybersecurity is incorporated into their overall risk management strategy.
- These disclosures must include “sufficient detail for a reasonable investor to understand” a company’s cybersecurity risk management—but will no longer include information on a company’s specific prevention and detection activities.
- A provision effectively requiring companies to have a cyber expert on their board, which the NAM strongly opposed, was not included in the final rule.
Our take: “The NAM is committed to a smart, flexible disclosure approach that ensures manufacturers—and their customers and shareholders—can stay protected from cybersecurity threats,” said NAM Senior Director of Tax and Domestic Economic Policy Charles Crain.
- “Manufacturers were glad to see that the SEC made some adjustments to its rule, but more must be done. The SEC and the Department of Justice must grant companies the flexibility to delay incident reporting to prevent threats to public safety and national security.”
Get protected: Every manufacturer should have the tools they need to protect themselves against cyberattacks. Check out NAM Cyber Cover—an exclusive cybersecurity and risk mitigation program for NAM member companies and organizations.
DOE Loosens Gas Stoves Rule
The Department of Energy is loosening proposed energy-efficiency regulations for gas cooktops after reviewing data submitted by one of the NAM’s trade association partners and a utility company, POLITICO (subscription) reports.
What’s going on: “In a notice of data availability to be published in Wednesday’s Federal Register, DOE floated less stringent efficiency requirements for gas stoves. The initial proposal called for a consumption limit of 1,204 … British thermal units, or kBtu, per year, down from the baseline estimate of 1,775 kBtu per year. But the new proposal raises those figures slightly. Now DOE is proposing a limit of 1,343 kBtu per year, down from a recalculated baseline of 1,900 kBtu per year.”
- The Association of Home Appliance Manufacturers and PG&E provided the DOE with data on cooktops with higher consumption rates, which the agency had not used in its initial efficiency testing.
- “Other comments led DOE ‘to better understand’ what features consumers want in a gas stove, including multiple high input rate burners and continuous cast-iron grates,” POLITICO reports.
Why it’s important: Manufacturers would be required to spend more than $2.5 billion to comply with the originally proposed rules, according to the DOE’s own estimates. However, consumers would save just 12.5 cents a month in energy costs.
- The mandates would have been so strict as to make 96% of gas stoves on the market noncompliant.
What Congress has done: In June the House passed the Save Our Gas Stoves Act, which would prevent the DOE from advancing its unworkable stove requirements.
What we’re doing: The NAM has held high-level discussions with policymakers on the importance of feasibility, affordability and consumer choice in rulemaking.
- To that end, in June the NAM and members of the NAM’s Council of Manufacturing Associations and Conference of State Manufacturers Associations created the Manufacturers for Sensible Regulations, which aims to combat the recent regulatory onslaught by federal agencies.
The NAM says: “Manufacturers depend on regulatory clarity and certainty,” said NAM Managing Vice President of Policy Chris Netram.
- Throughout the year, the Department of Energy has proposed an unprecedented slew of regulations, and many were aimed at home appliances. The DOE is now taking steps toward a solution that is less likely to raise production costs significantly for manufacturers, and less likely to reduce the available features, performance and affordability for consumers.”
SEC Finalizes Cybersecurity Disclosures Rule
After an aggressive campaign by the NAM, the U.S. Securities and Exchange Commission has scaled back a damaging cybersecurity proposal that would have been deeply problematic for manufacturers. Yet, the final regulations still impose compliance burdens on publicly traded companies. Here’s what manufacturers can expect now that the rule is finalized.
The background: Last year, the SEC proposed a new set of cybersecurity disclosure requirements for public companies.
- The centerpiece of the rule was a mandate to disclose cybersecurity incidents to the public within four days.
- The proposal also would have required detailed reporting on companies’ policies and procedures for responding to cybersecurity threats.
The problem: Requiring detailed public disclosures about cybersecurity incidents and processes could provide a roadmap to potential hackers, and sharing information about ongoing incidents could compromise efforts to stop an attack.
The NAM response: The NAM urged the SEC to make commonsense adjustments to protect manufacturers from attacks and give companies the flexibility to respond to cybersecurity incidents appropriately.
The result: The final rule is more tailored than the initial proposal, reducing the risk that companies will be forced to expose sensitive information. But its requirements still constitute new compliance burdens on manufacturers.
For the details of the final rule, read the full story.
Every manufacturer should have the tools they need to be protected against cyberattacks. Check out NAM Cyber Cover—an exclusive cybersecurity and risk mitigation program for NAM member companies and organizations.
Climate Amendment on Track to Pass Senate
An international treaty now on course to clear the Senate “is the strongest enforceable international accord on greenhouse gases to which the U.S. has agreed to abide,” according to POLITICO Pro (subscription).
The background: The Kigali Amendment, advanced Wednesday by the Senate Foreign Relations Committee, is a change to the Montreal Protocol of 1987, which “banned various chemicals [hydrofluorocarbons, or HFCs] that were depleting Earth’s ozone layer.”
- Negotiated in 2016 by the United Nations, the Kigali Amendment aims to phase down the global use of HFCs, popular refrigerant alternatives and potent greenhouse gases.
- It “is projected to avoid up to half a degree Celsius of warming by 2100, making it a key part of global goals to limit warming.”
- In late 2020, Congress passed legislation requiring the EPA to issue rules phasing down the use of HFCs by 85% by 2036, in keeping with the Kigali Amendment’s requirements.
Facilitating the next generation: “With ratification of the Kigali Amendment, the U.S. will join about 130 countries in a multi-decade plan to phase down the production and consumption of 18 highly polluting substances known as HFCs,” Sen. Jim Risch (R-ID) said, according to POLITICO Pro.
- “The Kigali Amendment will facilitate the transition to the next generation of refrigerants. Our U.S. industry enjoys a strong competitive advantage in the production of successor chemicals that will replace HFCs. Approval of this treaty will ensure our companies have full and fair access to the markets of the other treaty parties.”
Next steps: Assuming all 50 Democrats vote for the treaty, final Senate ratification will require a minimum of 17 Republican votes to reach the required two-thirds majority.
Our take: The NAM applauded the Kigali Amendment’s passage, which it calls for in its climate change roadmap, “The Promise Ahead.”
- “We have been urging policymakers to support Kigali ratification and prove that smart policy can be a win for the economy and the environment,” said NAM Vice President of Energy and Resources Policy Rachel Jones.
- “If we can finish getting this through the Senate, we will have set ourselves on a path to create up to 150,000 jobs in the United States and cut billions of tons of CO2 from the atmosphere. This kind of win-win should be the model for approaching all of our environmental challenges.”
Michigan Homebuilders Push Back on Air Quality Proposal
“Policy can’t be developed in a vacuum,” says Dawn Crandall, executive vice president of government relations for the Home Builders Association of Michigan. “People need to look at how one policy impacts that next thing. Everything is tied together.”
That’s Crandall’s message for the Environmental Protection Agency, as it considers a proposed air quality rule to restrict particles called PM2.5. While the regulations might not appear to impact the housing industry directly, they could prevent manufacturers from expanding facilities and creating jobs in Michigan—which does affect the housing market.
The concern: If manufacturers are unable to grow in the state or open new facilities, fewer people will need housing. That’s bad news for homebuilders.
- “If you put in these EPA regulations that are going to create a barrier for companies looking to move here, and then they decide they don’t want to, that’s going to impact Michigan’s ability to be an economic destination,” said Crandall.
- “And if you make it harder for businesses to employ employees, then they don’t need housing. That has a big impact on us.”
A shaky foundation: Michigan’s housing industry is still recovering from the significant downturn it experienced about 15 years ago.
- That slump was dramatic: according to Crandall, the number of permits filed in Michigan for single-family homes fell sharply from 54,721 in 2005 to around 15,000 two years later, bottoming out to about 6,900 in 2009.
- Although the industry has seen some recovery since then, new construction remains relatively low, and Crandall worries that shocks caused by the EPA’s proposed regulations could do further harm.
- “I think we’ve hit rock bottom, and we’re slowly coming out of it,” said Crandall. “But we’re only projecting 16,000 single-family permit builds this year—and anything that’s going to impact residential construction is not good for the state of Michigan.”
Another challenge: Ultimately, Crandall is concerned that the EPA’s proposed rule will simply add to a long list of challenges for homebuilders.
- “We’re already facing enough hurdles,” said Crandall. “There’s a lack of skilled workers who can do residential construction. Material costs peaked during COVID. We get a lot of our lumber from Canada, so these Canadian wildfires could have an impact. So if PM2.5 is going to affect economic development in our state, that’s going to have an impact on us, too.”
The big idea: “We’re all connected in some form or fashion,” said Crandall. “Michigan needs to grow our population, and we can’t do that if companies don’t bring people into our state who want to live, work and play here. We’re one big ecosystem.”
House Financial Services Approves NAM-Supported ESG Package
The House Financial Services Committee has spent the last month holding hearings about environmental, social and governance policies that impact American businesses—and the NAM has been fighting for manufacturers every step of the way. This week, the committee held a markup to pass a package of legislation on the topic, and the NAM’s priorities were front and center.
The issue: Manufacturers in the U.S. are at the forefront of climate stewardship and innovation even as they power the U.S. economy, yet politically motivated activists and proxy advisory firms are making it difficult for manufacturers to succeed.
- Recent actions from the U.S. Securities and Exchange Commission have empowered these groups. From unworkable ESG disclosure mandates to new standards encouraging shareholder activism to a lack of oversight of proxy firms, manufacturers are getting squeezed.
NAM in action: The NAM has advocated aggressively on behalf of manufacturers, pressing Congress to curb the impact of activists, proxy firms and the SEC on public company governance.
- NAM President and CEO Jay Timmons urged Congress to make changes that would protect manufacturers and Main Street investors, while NAM Managing Vice President of Policy Chris Netram testified before the Financial Services Committee about the need for action.
- “Congress must step in to depoliticize the business decisions that impact the lives and life savings of millions of Americans,” said Timmons. “Manufacturers are determined to create jobs, lead the economy and improve the quality of life for all Americans. We are counting on [Congress’] leadership to counter the SEC’s regulatory overreach and help us achieve these goals.”
The result: The House committee has embraced the NAM’s proposed reforms, a huge victory for manufacturers across the United States. The legislation approved by the committee this week would:
- Prevent activists from hijacking the proxy ballot in pursuit of agendas unrelated to long-term business growth and shareholder value creation;
- Rein in proxy advisory firms and limit their outsized influence on corporate governance;
- Reinforce asset managers’ fiduciary duty to Main Street investors and retirees; and
- Ease ESG disclosure mandates by requiring that public companies only report information that is material to their shareholders.
The last word: “Manufacturers strongly support the Financial Services Committee’s efforts to rein in the SEC’s regulatory overreach, keep activists out of the boardroom and protect Americans’ investments in manufacturing growth,” Netram said prior to the committee’s markup. “[W]e look forward to working with [Congress] to ensure that manufacturers can continue to drive economic expansion in the U.S. and support American competitiveness on the world stage.”
House Financial Services Approves NAM-Supported ESG Package
The House Financial Services Committee has spent the last month holding hearings about environmental, social and governance policies that impact American businesses—and the NAM has been fighting for manufacturers every step of the way. This week, the committee held a markup to pass a package of legislation on the topic, and the NAM’s priorities were front and center.
The issue: Manufacturers in the U.S. are at the forefront of climate stewardship and innovation even as they power the U.S. economy, yet politically motivated activists and proxy advisory firms are making it difficult for manufacturers to succeed.
- Recent actions from the U.S. Securities and Exchange Commission have empowered these groups. From unworkable ESG disclosure mandates to new standards encouraging shareholder activism to a lack of oversight of proxy firms, manufacturers are getting squeezed.
NAM in action: The NAM has advocated aggressively on behalf of manufacturers, pressing Congress to curb the impact of activists, proxy firms and the SEC on public company governance.
- NAM President and CEO Jay Timmons urged Congress to make changes that would protect manufacturers and Main Street investors, while NAM Managing Vice President of Policy Chris Netram testified before the Financial Services Committee about the need for action.
- “Congress must step in to depoliticize the business decisions that impact the lives and life savings of millions of Americans,” said Timmons. “Manufacturers are determined to create jobs, lead the economy and improve the quality of life for all Americans. We are counting on [Congress’] leadership to counter the SEC’s regulatory overreach and help us achieve these goals.”
Read the full story here.
Illinois Chemical Industry Warns Against New EPA Standard
The chemical industry has a wide reach. According to Mark Biel, CEO of the Chemical Industry Council of Illinois, 96% of products made in the United States are either manufactured by the chemical industry itself or using materials it produces.
- “We make everything from cell phones to packaging,” said Biel. “People don’t realize the integral role that chemistry plays in their lives.”
And for Illinois in particular, the chemical industry isn’t just making products—it’s making careers.
- “Our state has 46,000 people in the chemical industry, and the average wage is a little over $114,000,” said Biel. “We are the second largest manufacturing sector in Illinois, which is the fourth largest chemical processing state. Folks don’t realize how large and important the chemical industry is to Illinois.”
But as the Environmental Protection Agency considers imposing a new, stricter air quality standard for particles called PM2.5, chemical manufacturers in Illinois are sounding the alarm. According to Biel, the new regulations misunderstand the situation—and threaten to cause irreparable harm for manufacturers across the state.
The background: Manufacturers have long been committed to reducing particulates in the air, including PM2.5, and have made huge strides over the past half-century. But to further reduce PM2.5 will be a tall order.
- “We should be focused on enforcing the regulations we already have in the books,” said Biel. “The U.S. already has strong regulations in place—ones that many areas are still working to meet. Let us be smart about new regulations, which means we should not change air permitting before meeting current standards.”
The local angle: For the chemical industry in Illinois, the changes could be particularly damaging.
- With access to waterways, relatively inexpensive electricity and extensive natural gas pipeline infrastructure, the St. Louis and Chicagoland areas of Illinois are hubs for the national chemical industry.
- However, if the EPA’s standards become stricter, it could deter investments to these metro areas significantly.
- “It’s difficult enough to permit a new facility in the Chicagoland area, and when you throw on additional burdens, it makes it harder and harder to justify making the investment in these facilities,” said Biel.
The global stage: Especially at a time when many manufacturers are looking for ways to bring investments and supply chains back to the United States, this kind of onerous regulation could create a stumbling block.
- “Our lawmakers want manufacturing to come back to the U.S., but this regulation does the exact opposite,” said Biel. “With all the new investment, it’s important that more and more manufacturers locate in the U.S. to avoid supply chain complications and delays. This regulation hinders that development.”
The last word: “I’m bullish on the long-term prospects for our industry, but sometimes the EPA loses sight of the reality that their regulations are already sufficient,” said Biel. “The current PM2.5 standard has worked. But this proposal goes far beyond that and will hinder a crucial opportunity for the industry to grow in the U.S.”