By Charles H. Green
As reported here last week, the SBA 7(a) loan guaranty program has experienced record volumes this year and was suspended due to exhausting the program’s FY 2015 authorization of $18.75 billion. Even though the program operates with a zero subsidy, meaning that Congress does not appropriate funds to cover the cost of the loan guarantees, an authorization limit is imposed annually in the federal budget.
On Thursday, the Senate quickly passed a measure that would increase the authorization to guarantee up to $23.5 billion of loans for this fiscal years, which expires at the end of September. The same authorization level has already been included in the FY 2016 budget for the 7(a) program. The program, which provides small business owners with working capital up to $5 million, has approved its entire $18.75 billion to date.
The House of Representatives pass its version of the bill to lift the guarantee limit with bipartisan support, on Monday evening.
“The Committee has recognized the growth in the 7(a) program for a while, which is why we recommended a raise in the cap for the next fiscal year,” Steve Chabot (R, Ohio), chairman of the House Small Business Committee, said in an emailed statement. Turning the SBA’s spigot back on “means more firms will have resources to invest in their operations, expand and ultimately create good-paying jobs,” said Rep. Nydia Velazquez of New York, the committee’s ranking Democrat.
The increase in loan volumes is a testament to the strength of the economic recovery, the SBA says. “The amount of lending is way up,” says Miguel Ayala, a SBA spokesman. “There is a positive economic sentiment, and small business owners are taking more risk and want to expand their businesses.”
For this authorization to be used up entirely without a non-controversial increase that has plenty of bipartisan support on the Hill is another embarrassment for Congress. The Senate Small Business and Entrepreneurship Committee had unanimously voted to raise the current 7(a) authorization limit to $20.5 billion in April, but the full Senate never acted on it. Likewise, the House Small Business Committee was apparently caught flat-footed when the authorization cap was reached.
Small business lending remains suppressed following the financial crisis, despite several improvements over the last 24 months, leading many banks to turn to SBA lending.
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