WASHINGTON – Two U.S. Small Business Administration loan programs have run out of money, the federal agency said Wednesday.
The agency’s 7(a) and 504 programs have both run out of money, SBA Administrator Karen Mills said in a news release.
The 7(a) program guarantees up to 90 percent of a loan that small businesses may use to expand, purchase equipment or refinance their debt. The 504 program provides loans for building improvements or the purchase of major fixed assets.
“To date, these programs have supported more than $27.5 billion in lending to more than 60,000 small businesses across the country,” Mills said. “They have also brought more than 1,300 lenders back to SBA’s loan programs, increasing the points of access for small businesses to get the capital they have needed during these tough economic times.”
Congress boosted the programs with the passage of the economic stimulus law in February 2009. The legislation temporarily increased the guarantee on 7(a) loans to 90 percent and lowered fees for the 504 program. Congress has extended the programs four times since the stimulus money first ran out last November.
With no more money, the SBA said it would create a queue for businesses seeking the loans and return them to their pre-stimulus terms. Before the arrival of the federal stimulus, loans under the 7(a) program guaranteed 75 percent of the loan amount. Fees for the 504 program ranged from 0.5 percent to 3 percent depending on the size and term of the loan.
The SBA said it will lobby Congress for additional money.
“President Obama has laid out an aggressive agenda for providing small businesses with the tools they need to drive economic growth,” Mills said. “A key piece of that agenda is a longer-term extension of these increased guarantees and reduced fees, and we urge Congress to move quickly to continue these critical programs.”
The president and leaders in Congress have called for replenishing the two loan programs’ funds, but the legislation remains tied up on Capitol Hill.
The White House has also suggested increasing the maximum 7(a) loan size from $2 million to $5 million and raising the maximum 504 loan size from $2 million to $5 million and $5.5 million for manufacturers.
