(Kent Hoover) The Small Business Administration has instituted a waiting list for its flagship 7(a) loans because the program hit its annual lending cap of $18.75 billion on Thursday.
SBA officials, lenders and small business groups are urging Congress to raise the program’s authorization to $23.5 billion in order to free up loans for small businesses. Demand for the program is high because the government-guaranteed loans are the primary source of long-term loans, which feature lower monthly payments, for small businesses.
In recent weeks, lenders have been rushing to get loans processed for their clients, in anticipation that the cap would be reached. That has accelerated 7(a) lending to a fever pitch — more than $3 billion SBA loans have been processed since the beginning of this month. That’s more than five times the normal volume, according to the SBA.
Loans on the SBA’s waiting list will be approved in their order in the queue as more funding authority becomes available, either through congressional action or by cancellations of already-approved loans.
In a letter to members of Congress, Small Business Majority Founder and CEO urged them to quickly raise the SBA’s lending authority in order for the agency to meet the demand for these loans.
“Failure to raise the cap on 7(a) lending would be detrimental to small businesses, particularly small businesses that have been historically underserved,” Arensmeyer wrote.
Rep. Steve Chabot, who chairs the House Small Business Committee, is “working on a solution,” a spokeswoman for the Ohio Republican.
The committee’s ranking Democrat, Rep. Nydia Velazquez of New York, has introduced legislation to raise the cap to $23.5 billion. It’s co-sponsored by all the Democrats on the committee.
“It would be inexcusable for Congress to leave out in the cold small firms looking to build a new facility or purchase equipment,” Velázquez said. “This initiative creates jobs, fuels growth and does not cost the taxpayer a cent. It would be nothing short of legislative malpractice to not extend it through the summer.”