NSBA Warns Against 7(a) shutdown

September 4, 2019

On Sept. 3, the Small Business Access to Capital Coalition, led by NSBA, the National Association of Government Guaranteed Lenders (NAGGL) and the International Franchise Association (IFA) delivered a letter to Chairman Mike Quigley and Ranking Member Tom Graves of the House Subcommittee on Financial Services and General Government Appropriations and Chairman John Kennedy and Ranking Member Chris Coons of the Senate Subcommittee on Financial Services and General Government Appropriations urging them for assistance to avoid an October 1, 2019 shutdown of the U.S. Small Business Administration’s (SBA) 7(a) business loan program. The program is currently at risk because of the federal credit subsidy rate estimate in the President’s Fiscal Year 2020 Budget.

Many small businesses across the U.S. rely on the 7(a) program for financing when credit is not otherwise available. In 2018, approximately 60,000 small businesses across the country were able to open, run, and expand their businesses because of a 7(a) loan. Nearly 2,000 lenders supported these loans.

However, a flawed subsidy calculation prepared by the Office of Management and Budget (OMB) and SBA is putting the 7(a) loan program at risk. The calculation has unnecessarily driven up the cost of the loans, forcing borrowers to pay higher fees and lenders to raise interest rates. These up-front payments come directly out of the pockets of small business borrowers, depleting their resources which would otherwise support business growth. 

“One-in-four small businesses are unable to get the financing they need,” stated Todd McCracken, president and CEO of NSBA. “SBA lending is a critical option for many small businesses caught in a lending market that remains stacked against them. One of the few bright spots in small-business lending should be strengthened, not loaded-up with unnecessary fees.”

Click here to view the letter.