Congress is ready to levitate many SBA lending limits. No magic is involved, just the most ambitious rewrite of SBA programs in many years. The SBA reauthorization bills being pushed forward by the House and Senate-dwarfing predecessors passed in 1997 and 2000-aim to make bank loans both more numerous and fatter.
The Senate bill (S.1375) was introduced first, although both bills had passed full committees by the end of July. S.1375 makes changes to many SBA loan programs and affects HUBZone; federal procurement policies; and programs for women, minorities and American Indians. In the 7(a) loan guarantee program, the ceiling on "low doc" loans-used heavily by women and minorities-would be raised from the current $100,000 to $250,000, and exporters could borrow up to $2.6 million, an increase of $600,000.
The Senate bill also improves the SBA's Microloan program, in which 170 nonprofit community groups receive very low-interest loans from the SBA and then lend that money to local small businesses. The bill would allow the nonprofits to make revolving loans so small businesses could take out lines of credit, which they currently can't do.
The Senate bill also raises the SBA guarantee amount on 504 Loans from $1 million to $1.5 million, meaning the size of the 504 loans a bank can grant would jump from $2.5 million to $3.75 million. These loans are used primarily for real estate purchases.
The House bill (H.R. 2802) covers some of the same ground as its senate counterpart, but at 440 pages, it goes much further, leaving a lot of compromises for a conference committee to work out this fall.
Stephen Barlas is a freelance business reporter who covers the Washington beat for 15 magazines.