NEW YORK (AP) — The Small Business Administration's most popular lending program could go on hold later this month if the agency reaches the statutory limit on the amount of loans it can back.
Because of high lending levels, the SBA's 7(a) loan program will reach its $18.75 billion limit in guarantee money by the end of July or early August, two months before the government's fiscal year ends Sept. 30. Congress would have to approve any increase in the lending authority. However, lawmakers will be going on recess in August; unless they raise the limit before they leave town, the SBA won't be able to guarantee new loans.
SBA Administrator Maria Contreras-Sweet last month asked Congress to raise the limit to $22.5 billion. In letters to several lawmakers, Contreras-Sweet warned that without an increase, 7(a) loans would be suspended until the beginning of the new fiscal year on Oct. 1. Through the first three quarters of the fiscal year, the SBA had used up 75 percent of its guarantee money, and the fourth quarter is the 7(a) program's busiest time of the year, Contreras-Sweet said.
Rep. Nydia Velazquez, D-N.Y., the most senior Democrat on the House Small Business Committee was introducing a bill that would raise the lending limit to $23.5 billion, and warned that without an increase, there would be a backlog of lending that will extend into the fall.
Committee Chairman Steve Chabot, R-Ohio, was considering what steps might be taken, spokeswoman Kelley McNabb said.
The 7(a) program is the SBA's largest, with loans that can be used to buy or operate a business, purchase or improve equipment or property or refinance most types of business debt. The maximum loan amount is $5 million.
Small business lending has been increasing the past few years as companies have grown healthier and more willing to take on debt to expand. Companies apply to banks and other lenders for SBA loans; the banks then seek guarantees from the agency.
More information about the 7(a) program is available at www.sba.gov/7a-loan-program