Small business lending through the government’s biggest small business loan program reached the limit set by Congress in early July, but is headed for a restart thanks to House approval to increase the ceiling. The House approved a bill on Monday, July 27th with an amendment lifting the SBA’s lending cap from $18.75 billion to $23.5 billion for the 7(a) loan program.
Many small businesses feared that they would have to wait until the next fiscal year for loan approvals to take place. As small businesses are increasingly optimistic about the economy, they are applying for more bank loans, including loans from the SBA. The SBA posted an update on the 7(a) loan program, which stated that they had already approved over 45,000 loans for this fiscal year, totaling more than $16.5 billion. Once the 7(a) program hit its FY 2015 loan guaranty limit in early July, the SBA was forced to suspend 7(a) small business lending until the start of the new fiscal year, or until Congress increases the 7(a) loan authority. Now the lending cap has been increased, those 7(a) loans in queue should be eligible for funding. With more than 1,100 applications on hold, this is good news!
According to the SBA, the requirements for eligibility are based on specific aspects of the business, such as what the business does to receive its income, the character of its ownership and where the business operates. Universally applicable requirements to be eligible require that businesses should:
- Operate for profit
- Fall under the Small Business Size Standards as defined by the SBA
- Conduct business in the United States
- Have reasonable invested equity
- Use alternative financial sources, including personal assets, before seeking financial assistance
- Demonstrate the need for a loan
- Use the funds for the business
- Be up to date on any existing debt obligations to the U.S. government
Included in the 7(a) program is the SBA Express program, as well as Veterans Advantage loans, which will also be placed on hold until President Obama signs the bill. Programs not affected are the SBA’s 504 loan program for real estate and equipment, the Microloan Program, or the SBA disaster loan program.
Business owners are clearly feeling more positive about the prospect of taking on more debt in the form of loans. In 2014, the SBA did not get close to the limit until September, when the ceiling was raised before it was reached. While the prognosis is good, those companies waiting for loans may want to consider invoice factoring to keep the cash flowing through the waiting period. Rather than waiting 60, 90 or 120 days for invoices to be paid, a factoring company will purchase your outstanding invoices and can pay them in as little as 24 hours.