President Bush signed legislation last week to enlarge the Small Business Administration’s flagship 7(a) loan program, which backs 40 percent of all long-term lending to the country’s small businesses.
Under the new bill, the program will be able to back $16 billion in loans during the current fiscal year, up $3.5 billion from last fiscal year. The 7(a) program has suffered numerous funding shortfalls in recent years, causing the SBA to stop new loan applications and limit the size of loans.
While the legislation raises the cap on 7(a) loans to $1.5 million from $1 million, it is still below the $2 million level it operated at before the funding problems. Also, the program will no longer receive a government subsidy and will instead be supported entirely by fees from borrowers and lenders.