Robert Jay Dilger
Senior Specialist in American National Government
The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs designed to encourage lenders to provide loans to small businesses “that might not otherwise obtain financing on reasonable terms and conditions.” The SBA’s 7(a) loan guaranty program is considered the agency’s flagship loan guaranty program. It is named from section 7(a) of the Small Business Act of 1953 (P.L. 83-163, as amended), which authorized the SBA to provide business loans and loan guaranties to American small businesses. In FY2010, the SBA approved 47,002 7(a) loans amounting to more than $12.4 billion.
Congressional interest in small business access to capital, in general, and the SBA’s 7(a) program, in particular, has increased in recent years for three interrelated reasons. First, small businesses have reportedly found it more difficult than in the past to access capital from private lenders. Second, there is evidence to suggest that small business has led job formation during previous economic recoveries. Third, both the number of SBA 7(a) loans funded and the total amount of 7(a) loans guaranteed have declined. The combination of these three factors has led to increased concern in Congress that small businesses might be prevented from accessing sufficient capital to enable small business to assist in the economic recovery.
This report opens with a discussion of the rationale provided for the 7(a) program, the program’s borrower and lender eligibility standards and program requirements, and program statistics, including loan volume, loss rates, use of the proceeds, borrower satisfaction, and borrower demographics.
It then examines congressional action taken during the 111th Congress to help small businesses gain greater access to capital, including the enactment of P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), which provided additional funding to temporarily subsidize the 7(a) program’s fees and to increase the program’s loan guaranty percentage to 90%; and P.L. 111-240, the Small Business Jobs Act of 2010, which provides additional funding to extend the 7(a) program’s fee subsidies and 90% loan guaranty percentage through December 31, 2010, increases the program’s loan guaranty limit from $2 million to $5 million, and establishes an alternative size standard for the 7(a) and 504/CDC loan programs which is designed to increase the number of small businesses that can participate in the two programs. It also examines issues raised concerning the SBA’s administration of the 7(a) program, including the oversight of 7(a) lenders and the program’s lack of outcome-based performance measures.
Date of Report: October 22, 2010
Number of Pages: 31
Order Number: R41146
Price: $29.95
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Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Senior Specialist in American National Government
The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs designed to encourage lenders to provide loans to small businesses “that might not otherwise obtain financing on reasonable terms and conditions.” The SBA’s 7(a) loan guaranty program is considered the agency’s flagship loan guaranty program. It is named from section 7(a) of the Small Business Act of 1953 (P.L. 83-163, as amended), which authorized the SBA to provide business loans and loan guaranties to American small businesses. In FY2010, the SBA approved 47,002 7(a) loans amounting to more than $12.4 billion.
Congressional interest in small business access to capital, in general, and the SBA’s 7(a) program, in particular, has increased in recent years for three interrelated reasons. First, small businesses have reportedly found it more difficult than in the past to access capital from private lenders. Second, there is evidence to suggest that small business has led job formation during previous economic recoveries. Third, both the number of SBA 7(a) loans funded and the total amount of 7(a) loans guaranteed have declined. The combination of these three factors has led to increased concern in Congress that small businesses might be prevented from accessing sufficient capital to enable small business to assist in the economic recovery.
This report opens with a discussion of the rationale provided for the 7(a) program, the program’s borrower and lender eligibility standards and program requirements, and program statistics, including loan volume, loss rates, use of the proceeds, borrower satisfaction, and borrower demographics.
It then examines congressional action taken during the 111th Congress to help small businesses gain greater access to capital, including the enactment of P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), which provided additional funding to temporarily subsidize the 7(a) program’s fees and to increase the program’s loan guaranty percentage to 90%; and P.L. 111-240, the Small Business Jobs Act of 2010, which provides additional funding to extend the 7(a) program’s fee subsidies and 90% loan guaranty percentage through December 31, 2010, increases the program’s loan guaranty limit from $2 million to $5 million, and establishes an alternative size standard for the 7(a) and 504/CDC loan programs which is designed to increase the number of small businesses that can participate in the two programs. It also examines issues raised concerning the SBA’s administration of the 7(a) program, including the oversight of 7(a) lenders and the program’s lack of outcome-based performance measures.
Date of Report: October 22, 2010
Number of Pages: 31
Order Number: R41146
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
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