WASHINGTON (Reuters) - The U.S. Small Business Administration hit the $18.75 billion cap for its main loan guarantee program on Thursday, forcing it to halt the funding of new loans with more than two months left in the fiscal year.
SBA spokesman Miguel Ayala said the agency’s lending capacity for fiscal 2015 was exceeded by stronger-than-anticipated demand for the government-guaranteed 7(a) program loans made by banks to small businesses.
As the agency neared the cap, lenders have submitted a crush of $3 billion in loan applications in July so far, including $1.7 billion this week alone. The July figure is more than five times the agency’s recent monthly volume, Ayala said.
The strong demand, which has been building all year, is a sign of an improved economy in which small firms want to expand and need capital, particularly in poorer communities, Ayala said.
The agency’s loan guarantee capacity would normally be reset under a new cap at the Oct. 1 start to the next fiscal year but a two-month halt in lending could slow growth in the sector of the economy that creates the most net new jobs.
The depleted capacity comes just after the idling of another major government business lending and loan guarantee agency, the U.S. Export-Import Bank, whose charter expired on June 30. Conservative Republicans are aiming to kill off the trade bank, for providing “corporate welfare” to large, politically connected companies.But unlike Ex-Im, SBA has far fewer enemies in Congress and lawmakers were working on Thursday to craft legislation to extend this year’s lending cap to $23.5 billion.
U.S. Senate Small Business and Entrepreneurship Committee Chairman David Vitter, a Republican, said he is hoping to attach such legislation to a transportation funding bill now under consideration, or a customs enforcement measure.
“Inaction is unacceptable because too many small businesses rely on this important SBA program,” said Vitter, a candidate for Louisiana’s governor. “I’ve been working urgently to pass my legislation, which includes a temporary increase of lending authority and reforms to protect the taxpayer and ensure heightened congressional scrutiny of this vital small business loan program.”
House Small Business Committee Chairman Steve Chabot is expected to soon introduce similar legislation to lift the cap to $23.5 billion and prevent another rapid drain of resources.
Lifting the statutory cap would not require new funds to be appropriated, as the program sustains itself through fees banks pay for the guarantees.
Reporting by David Lawder; editing by Bill Trott and Christian Plumb