President Barack Obama recently proposed an increase in the limit of loans to the nation's smaller businesses under the Small Business Administration's (SBA's) 7(a) program.
The 7(a) program, the SBA's most popular, currently has a loan maximum of $2 million, which Obama suggested should be raised to $5 million. Additionally, the President also proposed increasing the size of SBA's less prevalent 504 loan from $2 million to $5 million for standard borrowers, which would support a total project of $12.5 million, and from $4 million to $5.5 million for manufacturers, which would support a total project of $13.75 million.
The SBA's Microloan program would also get a boost under the President's proposal as well, bumping the maximum from $35,000 to $50,000.
Obama's proposal was quickly picked up in the form of legislation, proposed by Senate Committee on Small Business and Entrepreneurship Chair Mary Landrieu (D-LA). "As Chair of the Senate Small Business Committee, I have held several hearings, roundtables and other events and have heard from lenders and small business owners that the current loan limits do not adequately meet their needs," said Landrieu. "That is why today I am introducing legislation to raise the limits on small business loans to as high as $5.5 million. Coupled with lower-cost capital available to community lenders, these higher loan limits will spur small business growth and aid in our nation's continued economic recovery."
The size of the increases proposed by the Obama administration were identical to those proposed in legislation earlier by Landrieu's republican counterpart on the Senate Small Business Committee, Olympia Snowe (R-ME). "These actions will help satisfy the capital needs of small businesses looking to start or expand their operations," she said. "They were good ideas when I introduced them nearly a year ago, they were good ideas when I reintroduced them in August, and I am pleased that others, including the President, are on board with these critical initiatives."
Many other parties have advocated an increase in the SBA's loan limits, including representatives from groups of manufacturers in a recent Senate hearing on restoring credit to their sector. The SBA itself pledged its commitment to increasing their loan limits and also to separate proposals by Obama to encourage banks to increase lending to the small business sector. "The President also announced additional support from the Treasury Department for smaller community lenders that are committed to increasing their lending to small businesses," said SBA Administration Karen Mills. "[U.S. Treasury] Secretary [Timothy]Geithner and I will host a conference on small business lending with Members of Congress, regulators, lenders and the small business community. The conference will discuss additional efforts that can be taken to provide small businesses with access to credit. These steps, coupled with SBA's ongoing efforts, will help small businesses grow and create jobs throughout America."
Jacob Barron, NACM staff writer. Follow us on Twitter at http://twitter.com/NACM_National.