WASHINGTON (Reuters) - U.S. President Barack Obama on Tuesday signed legislation renewing federal loan guarantees for small businesses that were exhausted last week and also raising the overall cap on the program.
The House of Representatives on Monday unanimously approved the Small Business Administration loan program in a bill the Senate had already passed.
The measure sets the new limit for the SBA's 7(a) loan guarantee program at $23.5 billion through Sept. 30, up from the previous cap of $18.75 billion.
Banks make the loans to qualifying small businesses, and the agency guarantees them, allowing lower interest rates and companies with short credit histories to obtain capital.
Stronger-than-expected demand for SBA-backed loans, fueled by an improving economy, meant that the program was exhausted sooner than expected. In a development first reported by Reuters, the agency was forced to suspend the funding of new loans as the cap was reached under a crush of $1.7 billion in applications last week alone.
But the Senate took lightning-fast action to raise the SBA lending limit in less than a day, marking a stark contrast with Congress' protracted battle over another federal loan guarantee agency, the U.S. Export-Import Bank.
Although both agencies guarantee private business loans and are financially self-sustaining through fees and interest, conservatives in Congress have targeted Ex-Im for extinction as a nest of "crony capitalism" that provides "welfare" to giant, politically connected corporations including Boeing Co, General Electric Co and Caterpillar Inc.
The Obama administration and many Democrats and Republicans in Congress support the bank, saying it helps American companies, large and small, compete against foreign rivals whose governments provide loan guarantees or other supports.
The legislation signed into law on Tuesday also waives some fees for U.S. military veterans applying for certain SBA loans.
(Reporting by Richard Cowan and David Lawder; Editing by Lisa Von Ahn)