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House passes legislation to beef up SBA loan program, create 500,000 jobs
- April 2, 2004
- News Release
- Shop Management
On March 31, the U.S. House unanimously passed bipartisan legislation to enhance the Small Business Administration's (SBA) 7(a) loan guarantee program, allowing lenders to provide larger loans to small business owners so they can grow and create jobs for U.S. workers. The legislation, which now goes to the Senate for consideration, could create up to 500,000 new jobs through September, supporters said.
Sponsored by House Small Business Committee Chairman Don Manzullo (R-IL) and committee ranking member Nydia Velázquez (D-NY) and endorsed by the Bush Administration and industry groups, H.R. 4062 would nearly triple the loan guarantee a lender could provide to a small business owner seeking financing through the 7(a) program. The current $562,000 loan guarantee limit would increase to $1.5 million.
The SBA estimates the additional $3 billion in loan authority created by the legislation will allow the SBA to guarantee an additional 30,000 loans through the end of the fiscal year, creating up to 500,000 jobs.
"Our small employers are ready to once again lead our nation to recovery, but they need our help. They need money to fund their expansions, and this legislation will provide them stronger opportunities to once again thrive and create jobs," Manzullo said. "I urge my counterparts in the Senate to act quickly on this legislation and send it to the President for his signature. The faster we act, the sooner our small employers can help put [U.S. workers] back to work."
In addition to providing the highest loan guarantee limit in the 7(a) program's history, the legislation would restore the overall program to full strength. Earlier this year, a funding shortfall prompted the SBA to suspend the program for a week, reduce the maximum loan size to $750,000, and prohibit piggybackloans (new loans on top of existing loans). The Manzullo- Velázquez legislation would restore the maximum loan size to $2 million and again allow piggyback loans. The legislation also would allow lenders to make loans up to $2 million in the SBA Express program, which offers a 50-percent loan guarantee compared to 7(a)'s 75-percent guarantee.
The additional loan authority provided through the bill is gained from fee adjustments primarily paid by lenders. The annual lender maintenance fee on 7(a) loans would increase from 0.25 to 0.36 percent. The lender also would pay a 0.70 percent upfront fee for piggyback loans. The small business owner would pay an additional 0.25 percent onetime fee for loan guarantees above $1 million.
Finally, the legislation extends the SBA's 504 loan program and the Small Business Investment Companies (SBIC) program through Sept. 30, the end of the federal fiscal year. The remaining SBA programs are extended through June 4.
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