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Congress Authorizes Additional SBA Lending

Written by Ken Gaebler
Published: 9/25/2014

Temporary funding bill expands the SBA 7(a) program to $18.5 billion as small business borrowing hits its fastest pace since 2011.

The Small Business Administration (SBA) is having a busy year--at least when it comes to the agency's popular 7(a) lending program. With demand for small business loans at a fever pitch, Congress recently authorized a bump in 7(a) loan program funding, increasing total lending authority for 2014 and 2015 to $18.5 billion.

SBA Lending Money

SBA 7(a) loans are small business stimulus programs and loan guarantees that serve as the agency's primary lending tool for startups and existing small businesses. Although loan proceeds can be used for a variety of purposes, maximum repayment terms are 25 years for real estate, 10 years for equipment and 10 years for working capital or inventory.

Currently, SBA 7(a) loan funding is happening at the fastest pace since 2011, when fee waivers and other temporary incentives increased SBA lending to a record level. The difference is that this time around, the need for increased SBA loan guarantees is being driven purely by demand, rather than government intervention.

By the beginning of September, the SBA had approved $17.3 billion in 7(a) loans for this fiscal year, which ends on September 30th. This is significantly higher than the $15.6 billion in loans that had been approved by the same time last year, although a late surge resulted in a FY 2013 funding total of almost $18 billion.

According to a report at The Business Journals, the growth of the 7(a) loan program may be attributable to larger loans. In 2010, Congress raised maximum loan amounts from $2 million to $5 million, and the SBA has already approved 1,676 loans larger than $2 million this year.

The total of this year's loans larger than $2 million is currently at $5.1 billion or 29% of 7(a) lending volume--an increase from the $4.3 billion or 27% percent of 7(a) volume during the same time last year.

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