Bill To Increase SBA SMB Lending Authority Passes In Senate

The U.S. Senate has unanimously passed a bipartisan bill that will increase the Small Business Administration’s authority over the Small Business 7(a) loan program.

A SBA 7(a) loan the most common type of SBA loan — can be for up to $5 million and is used for working capital, to refinance debt or to buy a business, real estate or equipment.

Last month, it was revealed that SMBs seeking loans decreased at the end of 2017. In fact, demand for financing was down, with only 40 percent of firms seeking funds — a 45 percent decrease from the year before. Instead, many SMB owners began dipping into their own piggy banks before seeking a lending agreement.

According to Banker & Tradesman, the proposed Small Business 7(a) Lending Oversight Reform Act would bolster the SBA’s office of credit risk management, enhance the SBA’s lender oversight review process and require the SBA to detail its oversight budget and perform a full annual risk analysis of the program.

In addition, the factors that must be considered under the “credit elsewhere” test that lenders perform before applying for financing would be fully explained.

The House passed the bill in May and it now heads to President Donald Trump, who is expected to sign it into law. The legislation would avoid a program shutdown by increasing the cap for the 7(a) program by 15 percent, reported American Banker.

“The SBA programs are an important part of business lending for many banks,” the American Banking Association said in a letter to House members last month, according to Banker & Tradesman. “They help fill a critical gap, particularly for early-stage businesses that need access to longer-term loans. The guarantee helps reduce the risk and capital required for banks, and facilitates loans that might never have been made without this important level of support. ABA has long supported this successful public-private partnership and is pleased that Congress recognizes the importance of this program.”

The bill also received support from credit union and bank advocacy groups.

“This program is critical to credit unions’ ability to provide loans to small businesses and entrepreneurs in their communities, which is an integral part of the industry,” Dan Berger, president and CEO of the National Association of Federally-Insured Credit Unions, said in a statement.


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