SBA 7a Loans in the News
Congressional Acts (2009-2011) to Increase and Improve Small Business Access to Capital
The most notable news to affect the SBA 7a program were changes made by the 111th Congress, which raised the 7(a) program’s gross loan limit from $2 million to $5 million; and provided more than $1.1 billion to temporarily subsidize the 7(a) and 504/Certified Development Companies (504/CDC) loan guaranty programs’ fees. This enabled the volume of SBA loans to grow rapidly after the recession.
Coming up, New SBA Initiatives for 7a Loans in HUBZones for 2018-2019
In FY2019, the SBA will waive the annual service fee for 7a loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reduce the up-front one-time guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan (again, not until FY2019).
Unfortunately, as of September 2018, the SBA no longer waives the up-front, one-time loan guaranty fee for regular smaller 7(a) loans – under $150K, with some exceptions.
Good News for Veterans for SBA 7a Loans in 2018-19
The SBA has also waived the up-front, one-time loan guaranty fee for veteran loans under the SBA Express program (up to $350,000) since January 1, 2014; and reduced the up-front, one-time loan guaranty fee on non-SBA Express 7(a) loans to veterans since FY2015 through FY2018 – extended through FY 2019.
The Veterans Entrepreneurship Act of 2015, provided statutory authorization and made permanent the veteran’s fee waiver under the SBAExpress program.
Is there something slightly rotten in Denmark?
New Congressional Oversight in 2018
Congress, concerned about increasing loss rates and lack of SBA oversight of 7(a) SBA lenders, would like to see more outcome-based performance measures. No news yet on what that would look like, only that individual lenders are now being assessed and ranked on loss rates and other parameters identified in the Small Business 7(a) Lending Oversight Reform Act of 2018.
Lenders will be held more accountable for the overall risk profiles of their SBA loan portfolios by the SBA and their SBA lending practices & procedures. Because of the new rules, we also expect that lenders will require borrowers to provide additional documentation to prove that they were ‘unable to obtain financing elsewhere’.
Among other provisions, the Reform Act…
- Codified the SBA’s Office of Credit Risk Management
- Required that office to annually undertake and report the findings of a risk analysis of the 7a program’s loan portfolio.
- Created a lender oversight committee within the SBA.
- Authorized the Director of the Office of Credit Risk Management to undertake informal and formal enforcement actions against SBA 7a lenders under specified conditions.
View our list of SBA White Paper Sources.
You need a strategic, cost effective solution to your financing needs and a funding partner you can trust. Let us put our decades of banking and structuring experience to work for you – with no upfront fees. Contact Speritas Capital Partners about your eligibility for an SBA loan today.
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