The Small Business Administration can resume lending to small businesses through its flagship 7(a) loan program now that Congress has raised the program’s authorization level.
The SBA was forced to suspend 7(a) lending on Thursday after the program hit its $18.75 billion annual loan ceiling with more than two months left in the government’s fiscal year. The Senate passed legislation Friday raising that limit to $23.5 billion, and the House followed suit Monday afternoon.
SBA lenders praised Congress for acting quickly to raise the cap, saying it’s not surprising that this year’s authorization level was reached early, considering the growing demand for loans from small businesses.
‘By listening to small business needs, Congress has enabled 7(a) loans to continue creating private-sector driven jobs from the bottom up, a hallmark of the 7(a) program and its unique partnership with private-sector lenders,” said Tony Wilkinson, president of the National Association of Government Guaranteed Lenders. “Throughout this fiscal year, we have seen unprecedented loan volume, an indication of a growing small business economy that still cannot find long-term financing from today’s overregulated and cautious conventional market.”
The increase in lending authority won’t cost the federal government any money; the cost of the government-guaranteed loan program is covered […]
As of Thursday, July 23 the SBA will no longer automatically be issuing SBA 7(a) loan numbers.
Congress will need to pass legislation to raise the SBA guarantee minimum above $18.75 billion for this fiscal year. If congress does not act October 1, 2015 will be the soonest loans not already approved will be approved for funding.
You may want to contact the loan processor for any loans you have in underwriting to see if they have been affected.
Some common SBA 7(a) misconceptions:
1. Commercial lenders ARE NOT REQUIRED to receive SBA underwriting approval to make a business acquisition loan. The 7(a) program provides free insurance to the bank (fees are paid by the borrower).
2. The SBA does NOT loan money via the 7(a) program. The SBA rather guarantees the commercial lenders money up to a defined percentage at the time of a borrower default.
3. Under “normal” circumstances it does not take “forever” to get an SBA guarantee commitment. The fact that $18.75 BILLION of guarantees have been approved this fiscal year so far proves that the program is rather efficient and very popular among business buyers.
Specific details from SBA’s notice 5000-1344 dated July 22 are:
Applications will be processed up to the point […]