Small Business Administration 7(a) Loan Guaranty Program

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 FY2011, the SBA approved 53,706 7(a) loans amounting to more than $19.6 billion.

Congressional interest in the 7(a) loan program has increased in recent years because of increased concern that small businesses might be prevented from accessing sufficient capital to enable them 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. For example, in 2009, P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), provided additional funding to temporarily subsidize the 7(a) program’s fees and to increase the program’s maximum loan guaranty percentage to 90%. In 2010, P.L. 111-240, the Small Business Jobs Act of 2010, provided additional funding to extend the 7(a) program’s fee subsidies and 90% maximum loan guaranty percentage through December 31, 2010, increased the program’s loan guaranty limit from $2 million to $5 million, and established 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. Also, P.L. 111-322, the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue the fee subsidies and the 7(a) program’s 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted (which occurred on January 3, 2011).

This report 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. It also provides information concerning the 7(a) program’s SBAExpress, Patriot Express, Small Loan Advantage, and Community Advantage programs.


Date of Report: October 12, 2011
Number of Pages: 35
Order Number: R41146
Price: $29.95

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