SBA Lifts Half-Million Loan Cap

WASHINGTON-Administrator Hector Barreto of the U.S. Small Business Administration last Tuesday lifted the cap on SBA-backed loans, an action which had many large lenders in an uproar. Participating lenders can once again submit applications for guaranteed loans of up to $2 million, as set in the statute, according to SBA. The cap appeared to be beneficial to credit unions, who have just recently been given the green light to greatly expand their SBA participation, since they are interested in making smaller business loans than larger lenders. The agency credited its newly revised econometric subsidy model, which more accurately forecasts the actual costs of the 7(a) loan program with making the change possible. The new model will be retroactive to the start of the current fiscal year. Additionally, Congress recently passed the fiscal year 2003 budget, which combined with the new model, will give SBA the power to approve more than $9.4 billion in 7(a) loans. “We are happy to be able to help small businesses looking for access to capital, and we are proud to do our part helping them to create new jobs for Americans,” Barreto explained. “The $500,000 cap on our maximum loan size was a management tool we had to adopt to address the funding limitations placed on the agency in October while maintaining continued service to the maximum number of small businesses.” The elevated loan cap was effective immediately.