“If you are seriously considering submitting a SBA 7(a) loan, you need to make your move now" says Nathan. "Once the authorized level of loans is reached no more loans can be made until October. The program is estimated to be used up mid-August, but there will now be a rush for submitting deals, so the authorized level could be used up in the next 2 weeks.”
According to the National Association of Government Guaranteed Lenders (NAGGL): “Given the current rate of loan approvals, NAGGL is now projecting that the FY 2015 authorized 7(a) program level of $18.75 billion will be used up by mid-August causing the program to shut down for the remainder of the fiscal year.
Even though the 7(a) program operates at zero subsidy – that is, no taxpayer dollars are necessary to support 7(a) loans – the Congress still must provide an authorization level for the program each year. Once that authorized level is reached, no more loans can be made. As of July 11, gross loan approvals for 7(a) (i.e., the total gross dollar value of all loans approved by SBA before any cancelations) stood at $16.637 billion. Typically approximately 6% of all loan approvals are canceled before the loans are disbursed. This means that there can be approximately $19.875 billion in GROSS loan approvals this year. Even with that slight cushion, based on the current rate at which 7(a) loans are being approved, program authority will be used up by mid-August.
Congress can fix this problem by raising the 7(a) authorization level. But action to do that must be taken before the end of July when it adjourns for its August recess.
For many months, NAGGL’s government relations team has been working to make congressional representatives aware of the strong possibility that the demand for 7(a) loans would exceed the available program level. When that possibility became a probability, NAGGL redoubled its efforts, culminating yesterday with a legislative fly-in with 30 NAGGL Board and staff members making visits to 66 congressional offices in Washington D.C. The purpose of those visits was simple – to make elected officials know about the imminent program shutdown, and to remind them of the critical role that 7(a) loans play in helping entrepreneurs start and grow their businesses in big cities, small towns, and rural areas across America. Generally, those visits were well-received; but receiving sympathy about the problem doesn’t solve it.”