Yesterday, the U.S. Small Business Administration halted its flagship 7(a) Loan Guaranty Program after hitting the $18.75 billion funding ceiling set for the fiscal year. Funding for the program is set to renew on October 1, 2015, but between now and then, small businesses will be unable to receive funding for an SBA 7(a) loan unless Congress increases the ceiling.
To encourage Congress to act now, sign this petition created by Fit Small Business, a publication that caters to small businesses on everything from finance to software recommendations. The author of this Marc Prosser is the publisher of Fit Small Business.
The SBA partially guarantees loans that banks and other lenders issue to small businesses. The agency sets loan terms that lenders must comply with, including maximum interest rates. As such, SBA loans are an inexpensive source of capital for small businesses that may be unable to qualify for other types of loans.
What's At Stake?
The SBA 7(a) program has seen a record level of growth this year. In a letter to Congress late last month, SBA Administrator Maria Contreras-Sweet said she expected the agency to hit the $18.75 billion cap by late August of this year. But due to unprecedented demand, it surpassed the limit yesterday.
To date this year, the SBA has backed more than 50,000 loans. Just this past week, it backed $1.7 billion in loans. Based on that level of demand, the temporary suspension of the 7(a) program places over 16,000 loan applications for over $15 billion in funding in jeopardy.
Halting the 7(a) program could have broader consequences for the entire economy because small businesses are a key source of job creation. Since the economic crash of 2008, small businesses have created roughly 64 % of new jobs. It's critical to keep the flow of capital open to small businesses so they can continue to hire and expand.
What Can Congress Do?
In order to restore the 7(a) loan guaranty program, Congress has to authorize additional funding for the SBA. Last night, the Senate passed legislation that raises the annual cap for 7(a) loans from $18.75 billion to $23.5 billion. Even if the House follows suit, that may not be enough funding to extend the program until October 1 when the annual cap resets.
Until Congress acts, 7(a) applications submitted by lenders will continue to be processed and approved by the SBA but will be placed in a "queue" awaiting Congressional action. As of now, the earliest that a small business could receive funding is October 1. If and when Congress authorizes additional funding, approved applications will be funded on a first come, first serve basis. The SBA has enough reserves to fund loan guarantees that were approved before noon EST on July 23.
What Can You Do Right Now?
U.S. small businesses employ over 60,000 million workers. With small businesses a source of livelihood for so many people, businesses can't afford to wait weeks or months to get access to essential, affordable capital. You can sign this petition to call on Congress to act immediately. Congress has the power to keep the 7(a) program running and help the SBA do what it does best: give deserving small businesses access to affordable capital.