Small business groups are urging federal lawmakers to extend the Small Business Administration’s signature loan program to aid small businesses, which reached its funding limit this week.
The 7(a) lending program, which provides low-interest capital to small business owners, hit the $18.75 billion cap on Thursday and experienced a last-minute rush of applications as entrepreneurs tried to lock down their requests ahead of the deadline. Those who apply now will be placed into a queue until the SBA is authorized to lend again, the administration said.
“SBA’s 7(a) loan program is an important source of capital for entrepreneurs who struggle to gain the credit they need to grow or start their businesses. Failure to raise the cap on 7(a) lending would be detrimental to small businesses, particularly [those] that have been historically underserved,” the Small Business Majority, a business group, said in a letter to lawmakers Thursday.
The agency approved $15.1 billion in loans as of June 20, 2015. This week alone, the SBA approved $1.7 billion in loans, and placed 900 loans in queue, said spokesperson Miguel Ayala.
SBA Administrator Maria Contreras-Sweet asked for congressional action on the matter in June, but some lawmakers have been reluctant to add funding because past studies have questioned the effectiveness of some of the agency’s programs.
The Senate passed legislation late Thursday night approving an increase to the cap as part of an amendment to a larger bill. The bill, sponsored by Sen. David Vitter (R-La.), chairman of the Senate Small Business and Entrepreneurship Committee, also includes provisions for heightened congressional scrutiny of the loan program and statutory language to prevent SBA loans from displacing private sector loans.
Rep. Nydia Velázquez (D-N.Y.), ranking member of the House Small Business Committee, introduced a bill earlier this week to increase the cap to $23.5 billion. The measure is backed by the SBA, the Small Business Majority and the Office of Management and Budget.
Despite the progress, small business owners have to be patient. The earliest any action could be taken on the House bill is next week, Ayala said. Once it passes, the bill would also need to be signed into law by the President, who is currently traveling in Kenya.
This isn’t the first time the SBA has approached the limit. Congress also increased the cap last September.