SBA 7(a) program could hit lending limit by July 28

July 23, 2015

WASHINGTON (7/23/15)--With U.S. Small Business Administration (SBA) 7(a) loans up 20% through July over last year, the agency is rapidly approaching its lending limit for the year.

According to the SBA, the $18.75 billion cap for fiscal year 2015, which ends Sept. 30, could be reached as soon as July 28, based on current lending volume.

“When the 7(a) program reaches its statutory program level of $18.75 billion, SBA will be forced to suspend 7(a) small business lending until the beginning of the new fiscal year,” SBA Administrator Maria Contreras-Sweet wrote in a letter sent to Congress last month.

The SBA’s 7(a) program guarantees portions of loans from credit unions and other financial institutions. This is especially notable for credit unions, as the SBA-guaranteed portion of 7(a) loans does not count against credit unions’ member business lending cap.

As of March, 377 credit unions reported outstanding SBA loans totaling more than $1.4 billion, according to CUNA.

CUNA and SBA staff have met a number of times in recent months to find new ways credit unions can use SBA resources to better serve their members.

Contreras-Sweet wrote to Sen. John Boozman (R-Ark.), chair of the Senate Appropriations subcommittee on financial services and general government, last month requesting the lending cap be raised to $22.5 billion.

Per SBA data, more than $15.1 billion in 7(a) loans were approved as of June 20.

“Net approvals through the same date are over $14.1 billion, indicating we have reached 75% of our annual program authority prior to even beginning the fourth quarter of the fiscal year, normally the program’s business time of year,” Contreras-Sweet wrote.

Rep. Nydia Velazquez (D-N.Y.), ranking member of the House Small Business Committee, has introduced a bill that would raise the lending cap to $23.5 billion.

If no action is taken, the agencies would be unable to lend anything beyond the $18.75 billion. The SBA would be unable to award any loans until Oct. 1, which likely will lead to a backlog of applications.

According to Velazquez, even a temporary shutdown of the 7(a) program could cost the economy more than 36,000 jobs over a two-month period.