The Small Business Administration’s flagship loan program suspended new lending after hitting the cap Thursday on its annual financing authority.
New loan requests under the 7(a) loan-guarantee program, by far the SBA’s most popular lending initiative, are still being accepted for review, but the agency won’t be able to guarantee new loans until Congress raises its borrowing cap. The agency is authorized to extend up to $18.75 billion in loan guarantees through the fiscal year ending Sept. 30, and it met that threshold around noon on Thursday, said Miguel Ayala, an SBA spokesman.
The congressional inaction on the SBA front comes as other government programs face similar challenges. On July 1, the U.S. Export-Import Bank, which finances exports, lost its authority to make loans or provide guarantees after its charter expired. Congress is also trying to keep alive federal highway funding before it runs out July 31.
The SBA warned Congress last month that at the current pace of lending, it would exceed its lending authority by late August. But the agency saw a surge of loan demand in July, with $3 billion in loan guarantees, nearly five times the normal volume for a summer month, said Mr. Ayala.
A Senate committee in April unanimously approved a bipartisan measure that would boost the financing cap to $20.5 billion for the current fiscal year and to $23.5 billion next year. Rep. Nydia Velá zquez (D., N.Y.) introduced a measure this week that would boost the cap to $23.5 billion for the year ending this September.
“For the sake of our economy, it is critical that Congress get this program back up immediately. Delays in these loans mean small businesses will put off projects and investments that create jobs,” Ms. Velá zquez said in a statement.
Last year, Congress boosted the loan program’s financing authority in September just as the SBA was projected to hit the cap. The 7(a) program doesn’t make loans directly but instead guarantees coverage of up to 85% of the loss on loans that meet certain standards.
The SBA approved some 52,000 loans last year totaling $19.2 billion.
Industry executives said a stronger economy has driven a surge in loan demand this year. They said they aren’t aware of political opposition to the increase in the SBA’s borrowing authority, but it wasn’t clear Thursday how or when Congress might move to boost the borrowing limit.[“source – nasdaq.com”]