SBA loans likely to resume next week; Senate raises cap on 7(a) lending

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Jul 24, 2015, 12:22pm EDT Kent Hoover Washington Bureau Chief

It looks like Congress will enable the Small Business Administration to restart its flagship 7(a) lending program.

The Senate passed legislation Thursday night that increases the annual authorization level for 7(a) loans from $18.75 billion to $23.5 million. The SBA was forced to suspend 7(a) lending at mid-day Thursday because the current $18.75 billion lending cap had been reached.

Demand from small businesses for these long-term loans is at a record high this year, and lenders had been rushing to get their customers’ loans processed before the cap was hit.

The House is expected to pass the Senate bill raising the cap early next week. The bill passed the Senate by unanimous consent.

“Small entities – the driving force of our economy – need to have access to capital,” said Sen. David Vitter, R-La., who chairs the Senate Small Business and Entrepreneurship Committee. “Thousands of small businesses across the nation rely on this important SBA program, and any prolonged lapse of the program would have threatened their ability to secure the credit necessary to start or expand their businesses.

“There’s been some pent-up anxiety amongst small business owners this week, so I’m relieved and glad to see the Senate pass my common-sense, broadly bipartisan amendment.”

Without action, small businesses seeking 7(a) loans would have had to wait until Oct. 1, the start of the federal government’s new fiscal year.

The legislation includes some reforms to the 7(a) program. It prohibits banks from making government-guaranteed 7(a) loans to small businesses solely because the liquidity of the lender depends on selling the guaranteed portion of the loan on the secondary market. The bill also prohibits lenders from using SBA guarantees if the sole reason for it is to allow lenders to exceed their legal lending limits.

These reforms should have little impact on 7(a) lending because lenders always cite a borrower-driven reason for needing the government guarantee, SBA lenders say.

The bill also requires the SBA to submit quarterly reports to Congress on 7(a) lending totals and updated estimates on when it will hit its maximum authorization level.

SBA Administrator Maria Contreras-Sweet thanked the Senate for passing the legislation.

“We continue to work with the House of Representatives and are confident that it will promptly pass similar legislation, allowing the SBA to continue supporting American small businesses as they grow and create jobs to strengthen the nation’s economy,” Contreras-Sweet said.

Tony Wilkinson, president of the National Association of Government Guaranteed Lenders, thanked Vitter and other members of Congress who pushed for this solution to the SBA loan suspension.

“Without their leadership, many small business borrowers throughout Main Street America would have to freeze hiring and halt expansion,” Wilkinson said.

The “unprecedented growth” in demand for 7(a) loans is “a good problem to have,” he said. “It means our small business economy is growing, and the 7(a) loan program is answering the call for long-term capital that simply isn’t available in today’s conventional market.”






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