Robert Jay Dilger Senior Specialist in American National
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 FY2012, the SBA approved 44,377 7(a) loans amounting to more than $15.1
billion. Proceeds from 7(a) loans may be used to establish a new business
or to assist in the operation, acquisition, or expansion of an existing
Congressional interest in the 7(a) program has increased in recent years
because of concerns that small businesses might be prevented from
accessing sufficient capital to enable them to assist in the economic
recovery. Some, including President Obama, argue that the SBA should be
provided additional resources to assist small businesses in acquiring
capital necessary to start, continue, or expand operations with the
expectation that in so doing small businesses will create jobs. Others worry
about the long-term adverse economic effects of spending programs that increase
the federal deficit. They advocate business tax reduction, reform of
financial credit market regulation, and federal fiscal restraint as the
best means to assist small business economic growth and job creation.
This report discusses 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 proceeds,
borrower satisfaction, and borrower demographics. It 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 examines congressional action taken during the 111th Congress to enhance small businesses
access to capital. For example, P.L. 111-5, the American Recovery and
Reinvestment Act of 2009 (ARRA), provided $375 million to temporarily
subsidize the 7(a) and 504/CDC loan guaranty programs’ fees and to
temporarily increase the 7(a) program’s maximum loan guaranty percentage
to 90%. P.L. 111-240, the Small Business Jobs Act of 2010, provided $505
million to extend the fee subsidies and 90% loan guaranty percentage
through December 31, 2010; increased the 7(a) program’s gross loan limit
from $2 million to $5 million; and established an alternative size
standard for the 7(a) and 504/CDC loan programs. P.L. 111-322, the Continuing Appropriations
and Surface Transportation Extensions Act, 2011, authorized the fee subsidies
and 90% loan guaranty percentage through March 4, 2011, or until available
funding was exhausted (which occurred on January 3, 2011).
This report also examines three bills introduced during the 112th Congress that would have changed
the 7(a) program. S. 1828, a bill to increase small business lending, would
have reinstated for a year following the date of its enactment ARRA’s fee
subsidies and 90% loan guaranty percentage for the 7(a) program. H.R.
2936, the Small Business Administration Express Loan Extension Act of
2011, would have extended a one-year increase in the SBAExpress program’s
maximum loan amount from $350,000 to $1 million, which expired on September 27, 2011,
for an additional year. S. 532, the Patriot Express Authorization Act of 2011,
would have provided the Patriot Express Pilot Program statutory authorization
and increased its loan guaranty percentages and maximum loan amount from
$500,000 to $1 million.
Information concerning the 7(a) program’s SBAExpress, Patriot Express, Small
Loan Advantage, and Community Advantage programs is also provided.
Date of Report: January 14, 2013
Number of Pages: 37 Order Number: R41146 Price: $29.95
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