SBA 7(a) Loan Program Hits Ceiling, Leaves Borrowers Hanging Until October

By Josh Hart | uncategorized 0

The SBA 7(a) loan program has run out of money, hitting its annual lending cap of $18.75 billion last week. Two more months remain in the program's fiscal year which begins again October 1.


The7(a) loan program finances small businesses who likely won't qualify for a traditional bank loan in eight states across the country.


The first freeze in a decade (other than during government shutdowns) leaves more than 900 applicants hanging. The good news is that just hours after the SBA suspended the program, Senate unanimously passed an entrepreneurship bill including an amendment to raise the cap to $23.5 billion, a record-setting amount. While the SBA and lenders say that any short-lived freeze will not significantly affect borrowers, specifically because of  the 2-week application processing window, other leaders disagree.


In California, Vice President of Lending at the Sherman Oaks-based Valley Economic Development Corporation Lynn Fernandez disagrees. She helps small businesses in California access the 7(a) loans and has said, "Any lapse in this program is going to have an impact on thousands of entrepreneurs and businesses." She cited 12 clients who had been approved and are waiting for the funds to keep cash flow moving in their operations, some of whom may face closing without the financial support.


Signs Of the Freeze


Experts say that as word got out about the potential shortcoming of funds in the program, applicants flooded in, with a record $3 billion requested in July, about five times the normal volume. Even back in February, lenders were warned that the ceiling was in sight.


From October 2014 to the end of June this year, lenders through the SBA 7(a) program made over 45,000 loans nationwide, upwards of $16.5 billion, a sharp rise in loans granted in that same span of time last year. It's a good sign overall the economy is growing. More start-ups and flourishing small businesses are seeking loans, more loans were granted, extending that positive growth into the economy.


Other Means of Funding Still Available


It's likely this is a short-term freeze and the cap will raise, allowing lenders to follow through with applicants who were on board to receive the funds. Meanwhile sources of funding not attached to the government program are still flourishing. Private investors and alternative lenders have benefitted from the upswing in the economy, helping small businesses with increased cash flow.


Essentially, where there's a will, there's a way. Shorter applications, faster turnaround times and scheduled repayment plans from online lenders put funds in the hands of entrepreneurs and small business owners who have had little success through traditional lending. While Senate is working on raising the cap on important programs like the SBA's 7(a) program, businesses have options, and signs point to continued economical growth.


Looking for alternative means to fund your small business? Professional lending experts at Bizlender can discuss options with you today. Check them out at or call 855-404-3070.

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Last edit: March 6, 2018


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