A bill that would give the Small Business Administration authority to increase the lending cap on its flagship program has passed the Senate.
The legislation avoids a program shutdown by increasing the cap for the 7(a) program by 15%. It passed the Senate by unanimous voice vote late Tuesday and is expected to be signed by President Trump.
The House passed the bill May 8.
Though 7(a) hasn’t experienced a program interruption in nearly three years, it is wildly popular among banks, which have pushed it to record funding levels for the last three years. The program guaranteed loans totaling $25.4 billion in fiscal year 2017 and is on pace to break that mark during this fiscal year, which ends Sept. 30.
Loan volume stood at $16.6 billion through the end of May, up slightly from last year. SBA Administrator Linda McMahon asked for emergency authority to lift the 7(a) lending cap in testimony before the House Small Business Committee in April 2017.
The SBA requested $29 billion of funding authority for 7(a) in its fiscal year 2018 budget. The agency is seeking $30 billion for fiscal year 2019. The federal government’s fiscal year begins Oct. 1.
In addition to granting the emergency authority to raise the 7(a) lending cap, the Small Business 7(a) Lending Oversight Reform Act codifies the SBA’s Office of Risk Management and its Lender Oversight Committee, making both permanent parts of the agency’s organizational structure. The legislation also updates the language of the Credit Elsewhere Test, which lenders use to demonstrate that a borrower cannot be helped with conventional credit.
The bill, which has received bipartisan support, was originally introduced in the House by Rep. Steve Chabot, R-Ohio.
“For small businesses that have trouble securing credit elsewhere, the 7(a) program is a lifeline,” Rep. Nydia Velazquez, D-N.Y., the ranking minority member of the Small Business Committee, said Wednesday in a press release. “This bill will enact needed reforms to increase transparency and ensure that the program fulfills its mission. … I look forward to it swiftly being signed into law.”
Bank groups also lauded Senate passage of the bill. Rebeca Romero Rainey, president and CEO of the Independent Community Bankers of America, said in a statement Wednesday that it would “promote a robust and sustainable 7(a) program.”
Under the 7(a) program, banks underwrite and make loans for up to $5 million to qualifying small businesses. A portion of the loans is then guaranteed by the SBA.
The Senate on Tuesday also passed a measure that increases the amount of borrowing power The SBA can provide to a small-business investment company by $25 million to $175 million.
SBICs use their own money as well as cash borrowed with an SBA guarantee to lend and invest in small businesses.
The House passed the Small Business Investment Opportunity Act of 2017 in July. Congress last raised the borrowing authority available to SBICs in 2009.