Small Business Administration 7(a) Loan Program Shutdown and Congress' Quick Reaction

Small Business Administration 7(a) Loan Program Shutdown and Congress' Quick Reaction

Late in the evening on July 23rd, 2015 the U.S. Senate voted to amend House Bill HR 4299 (The Veterans Entrepreneurship Act of 2015) to increase the 7(a) program cap to $23.5 billion for the 2015 fiscal year by unanimous consent. The measure moved to the House of Representatives yesterday, July 27th where it easily passed.

Previous to the 7/23 Senate Session the Small Business Administration reached its $18.7 billion cap for its main loan guaranty program at noon on that Thursday, effectively shutting down funding on all 7(a) loans.

The Small Business Administration acts as a guarantor to third party lenders on behalf of small-business owners through this 7(a) loan program, especially to the underserved communities like women, veterans and Latinos. 

Although Congress was able to act swiftly to put the program back on track, the SBA administrator had reached out to Congress in late June requesting assistance to avoid the shutdown of the program all together. The lending cap was on track to be met in August, but was met much earlier due to the record lending numbers in July. The Small Business Administrations 7(a) lending program is scheduled to open up by mid week.

The reopening of the program is good news; however, the weeklong shutdown has the capability to undermine the programs effectiveness. Some worry this ordeal could lead to the loss of bipartisan support or give naysayers more reason to criticize its vulnerability to politics. The Small Business Administration is supposed to give both borrowers and lenders a certain degree of confidence that may have very well been lost this past week.

The shutdown heavily disrupted the most successful year in the 7(a) lending programs history. 2015’s $18.75 billion grant from Congress was the largest ever and it ran out with plenty of time left in the fiscal year. Congress did agree to add $5 billion to help the program for the rest of the year, but what will that mean for fiscal year 2016?

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