SBA Primary Loan Program in JeopardyBy
It’s possible that the Small Business Administration (SBA) 7(a) Loan Guarantee program could shut down later this year, according to Julie Huston, chairwoman of the National Association of Government Guaranteed Lenders (NAGGL).
At the U.S. Senate Committee on Small Business and Entrepreneurship hearings on April 3, 2019, Huston said the program could stop on October 1, 2019, due to the proposal in President Trump’s fiscal year 2020 budget (which goes into effect that day) recalculating the program’s subsidy to require additional funding of 33 basis points, or $99 million, which would have to come from borrowers and lenders.
Huston told the committee, chaired by Sen. Marco Rubio (R.-Fla.), “Congress will need to either appropriate $99 million to the 7(a) program or amend the Small Business Act to raise the current caps in order to collect more fees from borrowers and lenders to cover the cost of the program. If there is not an amendment to the subsidy estimate or if Congress does not complete one of these two options by September 30 of this year—which will need to pass the Senate, House, and be signed into law by the President—the 7(a) program will shut down on October 1.”
Through the 7(a) program, the SBA reimburses lenders to a certain extent if a borrower defaults. In fiscal year 2018, financial institutions large and small provided about $25.4 billion in approvals to about 60,350 small businesses nationwide through the 7(a) program.