Businesses seeking loans under the Small Business Administration’s (SBA) flagship loan program may have to stall their plans as the program reportedly has hit its annual cap of $18.75 billion in loan guarantees two months ahead of its deadline.
Until Congress raises its borrowing cap, SBA won’t be able to guarantee loans anymore even though it’s still accepting loan applications under its 7(a) loan-guarantee program that provides coverage for up to 85 percent of loss on loans, according to The Wall Street Journal.
The halt comes as the SBA struggles to breathe life into its most popular loan program like several other government programs, such as the Export-Import Bank that lost its ability to make loans as its charter expired without renewal from the Congress.
After approving about 52,000 loans totaling $19.2 billion last year, the SBA saw a 5x surge in loan applications with $3 billion in loan guarantees resulting from the growing U.S. economy and had warned Congress about the looming deadline, which needed immediate attention, WSJ reported.
“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,” said Rep. Nydia Velázquez (D-NY), who suggested a cap boost to $23.5 billion for the year ending this September from the $20.5 billion approved by a Senate committee in April this year.