Small Business Administration 7(a) Loan Guaranty Program

Summary

The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs designed to encourage lenders to provide loans to small businesses "that might not otherwise obtain financing on reasonable terms and conditions." The SBA's 7(a) loan guaranty program is considered the agency's flagship loan program. Its name is derived from Section 7(a) of the Small Business Act of 1953 (P.L. 83-163, as amended), which authorizes the SBA to provide business loans and loan guaranties to American small businesses.

In FY2015, the SBA approved 63,461 7(a) loans totaling nearly $23.6 billion. The average approved 7(a) loan amount was $371,628. Proceeds from 7(a) loans may be used to establish a new business or to assist in the operation, acquisition, or expansion of an existing business.

Congressional interest in the 7(a) program has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to assist in the economic recovery. Some, including President Obama, argue that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, financial credit market reforms, and fiscal restraint as the best means to help small businesses further economic growth and job creation.

This report discusses the rationale provided for the 7(a) program; the program's borrower and lender eligibility standards and program requirements; and program statistics, including loan volume, loss rates, use of proceeds, borrower satisfaction, and borrower demographics. It also examines issues raised concerning the SBA's administration of the 7(a) program, including the oversight of 7(a) lenders and the program's lack of outcome-based performance measures.

The report also surveys congressional and presidential actions taken in recent years to enhance small businesses' access to capital. For example,

• Congress approved legislation during the 111^th Congress that provided more than $1.1 billion to temporarily subsidize the 7(a) and 504/Certified Development Companies (504/CDC) loan guaranty programs' fees and temporarily increase the 7(a) program's maximum loan guaranty percentage to 90% (funding was exhausted on January 3, 2011); raised the 7(a) program's gross loan limit from $2 million to $5 million; and established an alternative size standard for the 7(a) and 504/CDC loan programs.
• The Obama Administration has waived the up-front, one-time loan guaranty fee and ongoing servicing fee for 7(a) loans of $150,000 or less approved in FY2014, FY2015, and FY2016; the up-front, one-time loan guaranty fee for veteran loans under the SBAExpress program (up to $350,000) from January 1, 2014, through the end of FY2015 (called the Veterans Advantage Program); and 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans exceeding $150,000 in FY2015 and FY2016.
• P.L. 114-38, the Veterans Entrepreneurship Act of 2015, provided statutory authorization and made permanent the up-front, one-time loan guaranty fee for veteran loans under the SBAExpress program and increased the 7(a) program's FY2015 authorization limit to $23.5 billion from $18.75 billion.
• P.L. 114-113, the Consolidated Appropriations Act, 2016, increased the 7(a) program's authorization limit to $26.5 billion for FY2016 from $23.5 billion in FY2015.

Small Business Administration Loan Guaranty Programs

Proceeds from 7(a) loans may be used to establish a new business or to assist in the operation, acquisition, or expansion of an existing business. Specific uses include to acquire land (by purchase or lease); improve a site (e.g., grading, streets, parking lots, and landscaping); purchase, convert, expand, or renovate one or more existing buildings; construct one or more new buildings; acquire (by purchase or lease) and install fixed assets; purchase inventory, supplies, and raw materials; finance working capital; and refinance certain outstanding debts.⁴

In FY2015, the SBA approved 63,461 7(a) loans totaling nearly $23.6 billion.⁵ As will be discussed, the total number and amount of SBA 7(a) loans approved (and actually disbursed) declined in FY2008 and FY2009, increased during FY2010 and FY2011, declined somewhat in FY2012, and have increased since then.

Historically, one of the justifications presented for funding the SBA's loan guaranty programs has been that small businesses can be at a disadvantage, compared with other businesses, when trying to obtain access to sufficient capital and credit.⁶ Congressional interest in the 7(a) loan program has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to assist in the economic recovery.

Some, including President Obama, argue that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to help small businesses further economic growth and job creation.

This report discusses the rationale provided for the 7(a) program; the program's borrower and lender eligibility standards and program requirements; and program statistics, including loan volume, loss rates, use of the proceeds, borrower satisfaction, and borrower demographics. It also examines issues raised concerning the SBA's administration of the 7(a) program, including the oversight of 7(a) lenders and the program's lack of outcome-based performance measures.

It also surveys congressional and presidential actions taken in recent years to help small businesses gain greater access to capital. For example, during the 111^th Congress

• P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), provided the SBA an additional $730 million, including $375 million to temporarily subsidize the 7(a) and 504/ Certified Development Companies (504/CDC) loan guaranty programs' fees ($299 million) and to temporarily increase the 7(a) program's maximum loan guaranty percentage to 90% ($76 million).⁷
• P.L. 111-240, the Small Business Jobs Act of 2010, provided $505 million (plus $5 million for administrative expenses) to extend the fee subsidies and 90% loan guaranty percentage through December 31, 2010; increased the 7(a) program's gross loan limit from $2 million to $5 million; and established an alternative size standard for the 7(a) and 504/CDC loan programs to enable more small businesses to qualify for assistance.
• P.L. 111-322, the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue the fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted (which occurred on January 3, 2011).

During the 112^th Congress, several bills were introduced to expand the 7(a) program.

In addition, P.L. 113-235, the Consolidated and Further Continuing Appropriations Act, 2015, provided statutory authorization for the Veterans Advantage fee waiver in FY2015.¹¹

During the 114^th Congress, the Obama Administration

• waived the up-front, one-time loan guaranty fee and ongoing servicing fee for 7(a) loans of $150,000 or less approved in FY2016 as a means to encourage the demand for smaller 7(a) loans.¹²
• announced that it plans to continue to waive the up-front, one-time loan guaranty fee and ongoing servicing fee for 7(a) loans of $150,000 or less approved in FY2017.¹³
• waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans exceeding $150,000 in FY2016.¹⁴
• announced that it plans to waive 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans exceeding $150,000 and up to $500,000 in FY2017.¹⁵

In addition, P.L. 114-38, the Veterans Entrepreneurship Act of 2015, provided statutory authorization and made permanent the veteran's fee waiver under the SBAExpress program, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero.¹⁶ The act also increased the 7(a) program's FY2015 authorization limit of $18.75 billion (on disbursements) to $23.5 billion P.L. 114-113, the Consolidated Appropriations Act, 2016, increased the 7(a) program's authorization limit to $26.5 billion for FY2016.

Also, the following bills concerning the 7(a) program were introduced:

• S. 2125, the Small Business Lending and Economic Inequality Reduction Act of 2015, would provide permanent, statutory authorization for the Community Advantage Pilot program. On December 28, 2015, the SBA announced that it was extending the Community Advantage Pilot program through March 31, 2020. It had been set to expire on March 15, 2017.
• S. 2496, the Help Small Businesses Access Affordable Credit Act, would authorize the SBA Administrator, with prior notification to the House and Senate Committees on Small Business and prior notification and approval of the House and Senate Committees on Appropriations, to make loans in an amount equal to not more than 110% of the 7(a) program's authorization limit if the demand for 7(a) loans exceeds the limit. The Obama Administration also requested authorization to allow the SBA Administrator to continue to issue loans should the demand for 7(a) loans exceed the program's authorization limit.¹⁷

To be eligible for an SBA business loan, a small business applicant must

• be located in the United States;
• be a for-profit operating business (except for loans to eligible passive companies);
• qualify as small under the SBA's size requirements;¹⁸
• demonstrate a need for the desired credit; and
• be certified by a lender that the desired credit is unavailable to the applicant on reasonable terms and conditions from nonfederal sources without SBA assistance.¹⁹

To qualify for an SBA 7(a) loan, applicants must be creditworthy and able to reasonably assure repayment. SBA requires lenders to consider the strength of the business and the applicant's

• character, reputation, and credit history;
• experience and depth of management;
• past earnings, projected cash flow, and future prospects;
• ability to repay the loan with earnings from the business;
• sufficient invested equity to operate on a sound financial basis;
• potential for long-term success;
• nature and value of collateral (although inadequate collateral will not be the sole reason for denial of a loan request); and
• affiliates' effect on the applicant's repayment ability.²⁰

Borrowers may use 7(a) loan proceeds to establish a new business or to assist in the operation, acquisition, or expansion of an existing business. 7(a) loan proceeds may be used to

• acquire land (by purchase or lease);
• improve a site (e.g., grading, streets, parking lots, landscaping), including up to 5% for community improvements such as curbs and sidewalks;
• purchase one or more existing buildings;
• convert, expand, or renovate one or more existing buildings;
• construct one or more new buildings;
• acquire (by purchase or lease) and install fixed assets;
• purchase inventory, supplies, and raw materials;
• finance working capital; and
• refinance certain outstanding debts.²¹

Borrowers are prohibited from using 7(a) loan proceeds to

• refinance existing debt where the lender is in a position to sustain a loss and the SBA would take over that loss through refinancing;
• effect a partial change of business ownership or a change that will not benefit the business;
• permit the reimbursement of funds owed to any owner, including any equity injection or injection of capital for the business's continuance until the loan supported by the SBA is disbursed;
• repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow; or
• pay for a non-sound business purpose.²²

Loan Terms

Interest Rate

Collateral

Maturity and Gross Loan Amount

Annual Service Fee

Guaranty Fee

FY2014

FY2015

FY2016

FY2014

FY2015

FY2016

12 months or less and $150,000 or less

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

12 months or less and more than $150,000

0.52%

0.519%

0.473%

0.25%

0.25%

0.25%

Exceeding 12 months and $150,000 or less

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

Exceeding 12 months and $150,001 to $700,000

0.52%

0.519%

0.473%

3.00%

Exceeding 12 months and $700,001 to $5,000,000

0.52%

0.519%

0.473%

3.5% up to $1 million +3.75% over $1 million

As mentioned previously, the SBA waived its up-front, one-time guaranty fee for all veteran loans under the 7(a) SBAExpress program (up to $350,000) from January 1, 2014, through the end of FY2015; and P.L. 114-38, the Veterans Entrepreneurship Act of 2015, made this fee waiver permanent, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero.

The SBA also waived 50% of the up-front, one-time guaranty fee on all non-SBAExpress 7(a) loans (of $150,001 up to and including $5 million) for veterans in FY2015, and has extended that fee waiver through the end of FY2016. The SBA has announced that it plans to continue to waive 50% of the up-front, one-time guaranty fee on all non-SBAExpress 7(a) loans (of $150,001 up to and including $500,000) for veterans in FY2017.

Because the guaranty fee for loans of $150,000 or less is currently zero, lenders may not charge a guaranty fee for these loans to the borrower.⁶⁷

The Obama Administration argued that the fee waivers for 7(a) loans of $150,000 or less were necessary because the demand for smaller 7(a) loans had fallen and the waiver reduction "can be achieved with zero credit subsidy appropriations" because the "annual fees for larger 7(a) loans will cover the cost for those smaller loans."⁶⁸ The Administration also contended that waiving the fees on smaller SBA loans would "promote lending to small businesses that face the most constraints on credit access."⁶⁹

For context, 7(a) loans of $150,000 or less accounted for about 11.8% of the total amount of 7(a) loan approvals in FY2010 ($1.46 billion of $12.41 billion); 8.3% in FY2011 ($1.63 billion of $19.64 billion); 9.5% in FY2012 ($1.44 billion of $15.15 billion); 8.1% in FY2013 ($1.45 billion of $17.87 billion), 9.7% in FY2014 ($1.86 billion of $19.19 billion) and 9.7% in FY2015 ($2.28 billion of $23.58 billion).⁷⁰

The SBA also announced that eliminating the annual service and guaranty fees for 7(a) loans of $150,000 or less is part of its broader effort to "reduce barriers, attract new lenders, grow loan volumes of existing lenders and improve access to capital for small businesses and entrepreneurs."⁷¹

Some in Congress have questioned whether it is appropriate to require borrowers of larger 7(a) loans to, in effect, subsidize borrowers of smaller 7(a) loans, who might be direct competitors. They have suggested that it might be more appropriate to reduce fees across-the-board without regard to loan size.⁷²

The lender may charge an applicant "reasonable fees" customary for similar lenders in the geographic area where the loan is being made for packaging and other services. The lender must advise the applicant in writing that the applicant is not required to obtain or pay for unwanted services. These fees are subject to SBA review at any time, and the lender must refund any such fee considered unreasonable by the SBA.⁷³

The lender may also charge an applicant an additional fee if, subject to prior written SBA approval, all or part of a loan will have extraordinary servicing needs. The additional fee cannot exceed 2% per year on the outstanding balance of the part requiring special servicing (e.g., field inspections for construction projects). The lender may also collect from the applicant necessary out-of-pocket expenses, including filing or recording fees, photocopying, delivery charges, collateral appraisals, environmental impact reports that are obtained in compliance with SBA policy, and other direct charges related to loan closing.⁷⁴ The lender is prohibited from requiring the borrower to pay any fees for goods and services, including insurance, as a condition for obtaining an SBA guaranteed loan, and from imposing on SBA loan applicants processing fees, origination fees, application fees, points, brokerage fees, bonus points, and referral or similar fees.⁷⁵

The lender is also allowed to charge the borrower a late payment fee not to exceed 5% of the regular loan payment when the borrower is more than 10 days delinquent on its regularly scheduled payment. The lender may not charge a fee for full or partial prepayment of a loan.⁷⁶

For loans with a maturity of 15 years or longer, the borrower must pay to the SBA a subsidy recoupment fee when the borrower voluntarily prepays 25% or more of its loan in any 1 year during the first 3 years after first disbursement. The fee is 5% of the prepayment amount during the first year, 3% in the second year, and 1% in the third year.⁷⁷

The SBA attributed the decreased number and amount of 7(a) loans approved in FY2008 and FY2009 to a reduction in the demand for small business loans resulting from the economic uncertainty of the recession (December 2007-June 2009) and to tightened loan standards imposed by lenders concerned about the possibility of higher loan default rates resulting from the economic slowdown. The SBA attributed the increased number of loans approved in FY2010 and FY2011 to legislation that provided funding to temporarily reduce the 7(a) program's loan fees and temporarily increase the 7(a) program's loan guaranty percentage to 90% for all standard 7(a) loans from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000.⁷⁸

FY

Number of Loans Approved

Number of Loans Approved After Full Cancellations

Amount Approved After Full Cancellations (in billions)

2007

2008

2009

2010

2011

2012

2013

2014

2015

The fee subsidies and 90% loan guaranty percentage were in place during most of FY2010 and the first quarter of FY2011.⁷⁹ The increased number and amount of 7(a) loans approved in FY2013, FY2014, and FY2015 compared with FY2012 are generally attributed to improving economic conditions.⁸⁰

($ in millions)

FY

7(a)

504/CDC

Total Subsidy

Despite these improvements, the OIG continues to list lender oversight as one of the most serious management challenges facing the SBA because it argues that several issues that it has identified in audits have not been fully addressed.¹¹² Specifically, the OIG reports that the SBA needs to "implement and demonstrate the effectiveness of the process for monitoring and verifying lenders' implementation of corrective actions."¹¹³ For example, the OIG has recommended that the SBA (1) ensure the proper allocation of resources and scoping of the quality control program to complete required quality control activities at the loan operations centers; (2) ensure that corrective actions related to quality control findings are appropriately documented and completed within required timeframes; and (3) establish and implement a plan to conduct quality assurance activities at SBA loan operation centers.¹¹⁴

GAO has argued that the 7(a) program's performance measures (e.g., number of loans approved, loans funded, and firms assisted across the subgroups of small businesses) provide limited information about the impact of the loans on participating small businesses:

The program's performance measures focus on indicators that are primarily output measures–for instance, they report on the number of loans approved and funded. But none of the measures looks at how well firms do after receiving 7(a) loans, so no information is available on outcomes. As a result, the current measures do not indicate how well the agency is meeting its strategic goal of helping small businesses succeed.¹¹⁵

The SBA's OIG has made a similar argument concerning the SBA's Microloan program's performance measures. Because the SBA uses similar program performance measures for its Microloan and 7(a) programs, the OIG's recommendations could also be applied to the SBA's 7(a) program.

Specifically, as part of its audit of the SBA Microloan program's use of ARRA funds, the OIG found that the SBA's performance measures for the Microloan program are based on the number of microloans funded, the number of small businesses assisted, and program's loan loss rate. It argued that these "performance metrics ... do not ensure the ultimate program beneficiaries, the microloan borrowers, are truly assisted by the program" and "without appropriate metrics, SBA cannot ensure the Microloan program is meeting policy goals."¹¹⁶ It noted that the SBA does not track the number of microloan borrowers who remain in business after receiving a microloan to measure the extent to which the loans contributed to the success of borrowers and does not determine the effect that technical training assistance may have on the success of microloan borrowers and their ability to repay loans.¹¹⁷ It recommended that the SBA "develop additional performance metrics to measure the program's achievement in assisting microloan borrowers in establishing and maintaining successful small businesses."¹¹⁸

In its response to GAO's recommendation to develop additional performance measures for the 7(a) program, the SBA indicated that there are legal constraints and cost considerations associated with tracking the success or failure of SBA borrowers and that it had, at that time, "a new administrator who may make changes to the agency's performance measures and goals."¹¹⁹ In response to the OIG's recommendation to develop additional performance metrics for the Microloan program, the SBA reported that it had "contracted with the Aspen Institute to advise on appropriate program and performance metrics for both microloans and technical assistance grants."¹²⁰ More recently, the SBA indicated in its FY2017 congressional budget justification document that although it "continues to face barriers gathering outcome rich evaluation data with current restrictions in collecting personal identification information (PII) and business identification information (BII)" it "plans to further develop its analytical capabilities, enhance collaboration across its programs, provide evaluation-specific trainings, and broaden use of impact evaluations to support senior leaders and institutionalize the evidence-based process across programs."¹²¹ As part of this effort, the SBA has formed an Impact Evaluation Working Group.

Congress authorized several changes to the 7(a) program during the 111^th Congress in an effort to increase the number and amount of 7(a) loans.

During the 111^th Congress, the Obama Administration supported congressional efforts to temporarily subsidize fees for the 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90%. Congress subsequently provided nearly $1.1 billion to temporarily subsidize fees for the 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's maximum loan guaranty percentage to 90% for all standard 7(a) loans.

The Obama Administration also proposed the following modifications to several SBA programs, including the 7(a) program:

• increase the maximum loan size for 7(a) loans from $2 million to $5 million;
• increase the maximum loan size for the 504/CDC program from $2 million to $5 million for regular projects and from $4 million to $5.5 million for manufacturing projects;
• increase the maximum loan size for microloans to small business concerns from $35,000 to $50,000;
• increase the maximum loan limits for lenders in their first year of participation in the Microloan program, from $750,000 to $1 million, and from $3.5 million to $5 million in the subsequent years;
• temporarily increase the cap on SBAExpress loans from $350,000 to $1 million; and
• temporarily allow in FY2010 and FY2011, with an option to extend into FY2012, the refinancing of loans for owner-occupied commercial real estate that are within one year of maturity under the SBA's 504/CDC program.¹²²

The Obama Administration argued that increasing the maximum loan limits for the 7(a), 504/CDC, Microloan, and SBAExpress programs would allow the SBA to "support larger projects," which would "allow the SBA to help America's small businesses drive long-term economic growth and the creation of jobs in communities across the country."¹²³ The Administration also argued that increasing the maximum loan limits for these programs would be "budget neutral" over the long run and "help improve the availability of smaller loans."¹²⁴

Critics of the Obama Administration's proposals to increase the SBA's maximum loan limits argued that higher loan limits might increase the risk of defaults, resulting in higher guaranty fees or the need to provide the SBA additional funding, especially for the SBAExpress program, which has experienced somewhat higher default rates than other SBA loan guaranty programs.¹²⁵ Others advocated a more modest increase in the maximum loan limits to ensure that the 7(a) program "remains focused on startup and early-stage small firms, businesses that have historically encountered the greatest difficulties in accessing credit," and "avoids making small borrowers carry a disproportionate share of the risk associated with larger loans."¹²⁶

Others argued that creating a small business direct lending program within the SBA would reduce paperwork requirements and be more efficient in providing small businesses access to capital than modifying existing SBA programs that rely on private lenders to determine if they will issue the loans.¹²⁷ Also, as mentioned previously, others argued that providing additional resources to the SBA or modifying the SBA's loan programs as a means to augment small business access to capital is ill-advised. In their view, the SBA has limited impact on small businesses' access to capital. They argued that the best means to assist small business economic growth and job creation is to focus on small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint.¹²⁸

As mentioned previously, in 2009, ARRA provided an additional $730 million for SBA programs, including $375 million to temporarily reduce fees in the SBA's 7(a) and 504/CDC loan guaranty programs ($299 million) and increase the 7(a) program's maximum loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all standard 7(a) loans ($76 million).¹²⁹

P.L. 111-240 provided $505 million (plus $5 million for administrative expenses) to extend the 7(a) program's 90% maximum loan guaranty percentage and 7(a) and 504/CDC loan guaranty programs' fee subsidies through December 31, 2010 (later extended to March 4, 2011), or until available funding was exhausted (which occurred on January 3, 2011). The act also made the following changes to the SBA's programs:

• increased the maximum loan size for 7(a) loans from $2 million to $5 million;
• temporarily increased for one year (through September 27, 2011) the cap on SBAExpress loans from $350,000 to $1 million;
• increased the maximum loan size for the 504/CDC loans from $1.5 million to $5 million for regular projects, from $2 million to $5 million for projects meeting one of the program's specified public policy goals, and from $4 million to $5.5 million for manufacturers;
• increased the maximum loan size for the Microloan program from $35,000 to $50,000;
• authorized the SBA to establish an alternative size standard for the 7(a) and 504/CDC programs that uses maximum tangible net worth and average net income as an alternative to the use of industry standards and established an interim size standard of a maximum tangible net worth of not more than $15 million and an average net income after federal taxes (excluding any carryover losses) for the preceding two fiscal years of not more than $5 million; and
• allowed 504/CDC loans to be used to refinance up to $7.5 billion in short-term commercial real estate debt each fiscal year for two years after enactment (through September 27, 2012) into long-term fixed rate loans.¹³⁰

The act also authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to encourage community banks to provide small business loans ($4 billion was issued), a $1.5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs, and about $12 billion in tax relief for small businesses.¹³¹ It also contained revenue raising provisions to offset the act's cost and authorized a number of changes to other SBA loan and contracting programs.

Congress did not approve any changes to the 7(a) program during the 112^th Congress. However, several bills were introduced during the 112^th Congress that would have changed the program.

S. 1828, a bill to increase small business lending, and for other purposes, was introduced on November 8, 2011, and referred to the Senate Committee on Small Business and Entrepreneurship. The bill would have reinstated for a year following the date of its enactment the temporary fee subsidies for the 7(a) and 504/CDC loan guaranty programs and the 90% loan guaranty for standard 7(a) loans, which were originally authorized by ARRA and later extended by several laws, including the Small Business Jobs Act of 2010.

P.L. 114-38, the Veterans Entrepreneurship Act of 2015, authorized and made permanent the waiver of the up-front, one-time loan guaranty fee for veterans (and their spouse) in the SBAExpress program beginning on or after October 1, 2015, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero.¹³² The act also increased the 7(a) program's authorization limit from $18.75 billion in FY2015 to $23.5 billion.¹³³

On June 25, 2015, the SBA informed Congress that the 7(a) program "is on track to hit its authorization ceiling of $18.75 billion well before the end of FY2015."¹³⁴ The SBA indicated that "our activity and trend analysis reveal a strong uptick that, if sustained, would exceed our lending authority ceiling by late August."¹³⁵ If that were to occur, and in the absence of statutory authority to do otherwise, the SBA reported that it would have to suspend 7(a) loan making for the remainder of the fiscal year. The SBA requested an increase in the 7(a) loan program's authorization limit to $22.5 billion in FY2015.¹³⁶

On July 23, 2015, citing "unprecedented demand," the SBA suspended 7(a) program lending. The SBA indicated that it would continue to process loan applications "up to the point of approval" and then place approved loans "into a queue awaiting the availability of program authority."¹³⁷ Loans would be released "once program authority became available due to Congressional action or as a result of cancellations of loans previously approved this fiscal year."¹³⁸ Applications would then "be funded in the order they were approved by SBA, with the exception that requests for increases to previously approved loans will be funded before applications for new loans."¹³⁹

The SBA resumed 7(a) lending on July 28, 2015, following P.L. 114-38's enactment.¹⁴⁰ In addition to increasing the 7(a) program's authorization limit for FY2015, the act added requirements designed to ensure that SBA loans do not displace private sector loans (e.g., the SBA Administrator may not guarantee a 7(a) loan if the lender determines that the borrower is unable to obtain credit elsewhere solely because the liquidity of the lender depends upon the guarantied portion of the loan being sold on the secondary market, or if the sole purpose for requesting the guarantee is to allow the lender to exceed the lender's legal lending limit), and requires the SBA to report, on a quarterly basis, specified 7(a) program statistics to the House and Senate Committees on Appropriations and Small Business. These required statistics are designed to inform the committees of the SBA's pace of 7(a) lending, provide estimates concerning the date on which the program's authorization limit may be reached, and present information concerning early defaults and actions taken by the SBA to combat early defaults.

In addition, P.L. 114-113, the Consolidated Appropriations Act, 2016, set the 7(a) program's authorization limit at $26.5 billion for FY2016, an increase from the $23.5 billion limit in FY2015.

In a related development, S. 2496, the Help Small Businesses Access Affordable Credit Act, introduced on February 2, 2016, would authorize the SBA Administrator, with prior approval of the House and Senate Committees on Appropriations, to make loans in an amount equal to not more than 110% of the 7(a) program's authorization limit if the demand for 7(a) loans should exceed that limit. The Obama Administration has also requested authorization to allow the SBA Administrator to continue to issue loans should the demand for 7(a) loans exceed the program's authorization limit.¹⁴¹

The congressional debate concerning the SBA's 7(a) program during the 111^th Congress was not whether the federal government should act, but which federal policies would most likely enhance small businesses' access to capital and result in job retention and creation. As a general proposition, some, including President Obama, argued that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs.¹⁴² Others worried about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocated business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to help small businesses further economic growth and job creation.¹⁴³

In terms of specific program changes, increasing the 7(a) program's loan limit, extending the 7(a) program's temporary fee subsidies and 90% maximum loan guaranty percentage, and establishing an alternative size standard for the 7(a) program were all designed to achieve the same goal: to enhance job creation by increasing the ability of 7(a) borrowers to access credit at affordable rates. However, determining how specific changes in federal policy are most likely to enhance job creation is a challenging task. For example, a 2008 Urban Institute study concluded that differences in the term, interest rate, and amount of SBA financing were "not significantly associated with increasing sales or employment among firms receiving SBA financing."¹⁴⁴ The study also reported that the analysis accounted for less than 10% of the variation in firm performance. The Urban Institute suggested that local economic conditions, local zoning regulations, state and local tax rates, state and local business assistance programs, and the business owner's charisma or business acumen also "may play a role in determining how well a business performs after receipt of SBA financing."¹⁴⁵

As the Urban Institute study suggests, because many factors influence business success, measuring the 7(a) program's effect on job retention and creation is complicated. That task is made even more challenging by the absence of performance-oriented measures that could serve as a guide. Both GAO and the SBA's OIG have recommended that the SBA adopt outcome performance-oriented measures for its loan guaranty programs, such as tracking the number of borrowers who remain in business after receiving a loan to measure the extent to which the program contributed to their ability to stay in business.¹⁴⁶ Other performance-oriented measures that Congress might also consider during the 114^th Congress include requiring the SBA to survey 7(a) borrowers to measure the difficulty they experienced in obtaining a loan from the private sector and the extent to which the 7(a) loan or technical assistance received contributed to their ability to create jobs or expand their scope of operations.

The 7(a) program has several specialized programs that offer streamlined and expedited loan procedures for particular groups of borrowers, including the SBAExpress, Export Express, and Community Advantage programs. Lenders must be approved by the SBA for participation in these programs.

SBAExpress Program

The SBA indicated that its fee waivers for veterans are part "of SBA's broader efforts to make sure that veterans have the tools they need to start and grow a business."¹⁵³

Export Express

The Export Express program is designed to increase the availability of credit to current and prospective small business exporters that have been in business, though not necessarily in exporting, for at least 12 full months, particularly those small businesses needing revolving lines of credit.¹⁵⁷ Export Express loans may not be used to finance overseas operations, except for the marketing and/or distribution of products/services exported from the United States.¹⁵⁸

The program is generally subject to the same loan processing, making, closing, servicing, and liquidation requirements as well as the same maturity terms, interest rates, and applicable fees as the SBA Express program. Two key differences between the two programs is that the Export Express program's maximum loan amount is up to $500,000, and its guaranty rate is 90% for loans of $350,000 or less, and 75% for loans exceeding $350,000.

There were 80 lenders with approved SBA Export Express loan guaranties at the outset of FY2015. These lenders are located in 31 states, Guam, and Puerto Rico.¹⁵⁹ In FY2015, 62 lenders made 156 Export Express loans totaling $28.0 million.¹⁶⁰

Community Advantage 7(a) Loan Initiatives

The SBA's Community Advantage 7(a) loan initiative became operational on February 15, 2011.¹⁶¹ It is designed to increase lending to underserved low- and moderate-income communities. The Community Advantage initiative offers a streamlined application process for loans of up to $250,000. It, along with the now discontinued Small Loan Advantage program,¹⁶² replaced the Community Express Pilot Program, which was also designed to increase lending to underserved communities. It was created by the SBA in May 1999 and ended on April 30, 2011.¹⁶³

The Community Advantage pilot initiative is designed to increase lending in underserved communities by increasing "the number of SBA 7(a) lenders who reach underserved communities, targeting community-based, mission-focused financial institutions which were previously not able to offer SBA loans."¹⁶⁴ These mission-focused financial institutions include

• non-federally regulated Community Development Financial Institutions certified by the U.S. Department of the Treasury,
• SBA's Certified Development Companies,
• SBA's nonprofit microlending intermediaries, and, added in December 2015,
• SBA's Intermediary Lending Pilot Program intermediaries.¹⁶⁵

They are expected to maintain at least 60% of their SBA loan portfolio in underserved markets, including loans to small businesses in, or that have more than 50% of their full time workforce residing in, low-to-moderate income (LMI) communities; Empowerment Zones and Enterprise Communities; HUBZones; start-ups (firms in business less than 2 years); businesses eligible for the SBA's Veterans Advantage program; and, added in December 2015, Promise Zones.¹⁶⁶

As of September 30, 2015, there were 100 approved Community Advantage lenders, and 74 of them had issued at least one Community Advantage loan. These 74 active lenders had approved 1,757 Community Advantage loans amounting to $225.6 million. Of the $225.6 million in approved Community Advantage loans, $165.6 million had been disbursed as of September 30, 2015.¹⁶⁷

The initiative was originally announced as a three-year pilot program (through March 15, 2014) and was subsequently extended through March 15, 2017, and then through March 31, 2020.¹⁶⁸ It provides the same loan guaranty as that of the 7(a) program on loan amounts up to $250,000 (85% for loans up to $150,000 and 75% for those greater than $150,000). The loan proceeds can be used for the same purposes as those of the 7(a) program: expansion, renovation, new construction, purchase of land or buildings, purchase of equipment, fixtures, and lease-hold improvements, working capital, refinance debt for compelling reasons, seasonal line of credit, and inventory. The loan terms and guaranty fees are also the same as those of the 7(a) program.¹⁶⁹ The loan's maximum interest rate is prime, plus 6%.¹⁷⁰ The program has an expedited approval process, which includes a two-page application for borrowers and a goal of completing the loan approval process within 5 days to 10 days.¹⁷¹

The SBA has indicated that the Community Advantage initiative's goal is to "leverage the experience these institutions already have in lending to minority, women-owned and start-up companies in economically challenged markets, along with their management and technical assistance expertise, to help make their borrowers successful."¹⁷²

As mentioned previously, legislation has been introduced (S. 2125, the Small Business Lending and Economic Inequality Reduction Act of 2015) to provide permanent, statutory authorization for the Community Advantage Pilot program.

Author Contact Information

Footnotes

U.S. Small Business Administration (SBA), Fiscal Year 2010 Congressional Budget Justification, p. 30.

U.S. Congress, House Committee on Small Business, Subcommittee on Finance and Tax, Subcommittee Hearing on Improving the SBA's Access to Capital Programs for Our Nation's Small Business, 110^th Cong., 2^nd sess., March 5, 2008, H.Hrg. 110-76 (Washington: GPO, 2008), p. 2.

SBA, "Small Loan Advantage and Community Advantage 7(a) Loan Initiatives," at https://www.sba.gov/offices/headquarters/oca/resources/14836; and SBA, "Office of Capital Access/Resources: The SBA Export Express Program," at https://www.sba.gov/offices/headquarters/oca/resources/5929. The SBA also administers several special purpose loan guaranty programs that address particular business needs, including the International Trade Loan Program, Export Working Capital Program, the Community Adjustment and Investment Program (CAIP), CAPLines Program, Employee Trusts Program, and Pollution Control Program. The Pollution Control Program is currently not funded. See SBA, "Special Purpose Loans Program," at https://www.sba.gov/category/navigation-structure/loans-grants/small-business-loans/sba-loan-programs/7a-loan-program/special-purpose-loans-program.

13 C.F.R. §120.120.

SBA, "SBA Lending Statistics for Major Programs (as of 9/30/2015)," at https://www.sba.gov/sites/default/files/aboutsbaarticle/WebsiteReport_asof_09_30_2015.pdf. The number of 7(a) loans approved annually is typically about 10% to 20% higher than the number of loans disbursed (e.g., some borrowers decide not to accept the loan or there is a change in business ownership). The amount of 7(a) loans approved annually is typically about 10% to 15% higher than the amount disbursed. In FY2014, the SBA approved 52,044 7(a) loans totaling $19.2 billion. In FY2013, the SBA approved 46,399 7(a) loans totaling more than $17.8 billion. In FY2012, the SBA approved 44,377 7(a) loans totaling more than $15.1 billion.

U.S. Government Accountability Office (GAO), Small Business Administration: 7(a) Loan Program Needs Additional Performance Measures, GAO-08-226T, November 1, 2007, pp. 3, 9-11, at http://www.gao.gov/new.items/d08226t.pdf; and Veronique de Rugy, Why the Small Business Administration's Loan Programs Should Be Abolished, American Enterprise Institute for Public Policy Research, AEI Working Paper #126, April 13, 2006, at http://www.aei.org/files/2006/04/13/20060414_wp126.pdf. Proponents of federal funding for the SBA's loan guarantee programs also argue that small businesses can promote competitive markets. See P.L. 83-163, §2(a), as amended; and 15 U.S.C. §631a.

SBA, "Recovery Act Agency Plan," May 15, 2009, at https://www.sba.gov/sites/default/files/recovery_act_reports/sba_recovery_act_plan.pdf.

SBA, "SBA Information Notice: 7(a) and 504 Fees Effective on October 1, 2013," September 24, 2013, at https://www.sba.gov/sites/default/files/lender_notices/5000-1288.pdf; and SBA, "SBA Information Notice: 7(a) and 504 Fees Effective on October 1, 2014," September 18, 2014, at https://www.sba.gov/sites/default/files/lender_notices/5000-1318.pdf.

The small business must be owned and controlled (51%+) by one or more of the following groups: veteran, active duty military in the Transition Assistance Program, reservist or National Guard member, a spouse of any of these groups, or a widowed spouse of a servicemember or veteran who died during service or of a service-connected disability. See SBA, "SBA Procedural Notice: SBA Veterans Advantage," December 18, 2013, at https://www.sba.gov/sites/default/files/lender_notices/5000-1299_0.pdf; and SBA, "SBA Information Notice: SBA Veterans Advantage: Renewal and Expansion of Fee Relief," September 19, 2014, at https://www.sba.gov/sites/default/files/lender_notices/5000-1319.pdf.

SBA, "SBA Information Notice: SBA Veterans Advantage: Renewal and Expansion of Fee Relief," September 19, 2014, at https://www.sba.gov/sites/default/files/lender_notices/5000-1319.pdf.

S. 2143, the Veterans Entrepreneurship Act, would have authorized and made permanent the SBA's Veterans Advantage fee waiver.

SBA, "SBA Information Notice: 7(a) and 504 Fees Effective on October 1, 2015," September 28, 2015, at https://www.sba.gov/sites/default/files/lender_notices/5000-1352.pdf.

SBA, Fiscal Year 2017 Congressional Budget Justification and FY 2015 Annual Performance Report, p. 7.

SBA, "SBA Information Notice: SBA Veterans Advantage - Renewal of Fee Relief for Certain Loans," September 30, 2015, at https://www.sba.gov/sites/default/files/lender_notices/5000-1354.pdf.

SBA, Fiscal Year 2017 Congressional Budget Justification and FY 2015 Annual Performance Report, p. 7.

U.S. Congress, House Committee on Small Business, Veterans Entrepreneurship Act of 2015, report to accompany H.R. 2499, 114^th Cong., 1^st sess., June 25, 2015, H.Rept. 114-187 (Washington: GPO, 2015), p. 9.

Sec. 521. For loans and loan guarantees that do not require budget authority and the program level has been established in this act, the SBA Administrator may increase the program level for such loans and loan guarantees by not more than 15%: Provided, that prior to the Administrator implementing such an increase, the Administrator notifies, in writing, the Committees on Appropriations and Small Business of both Houses of Congress at least 15 days in advance. See U.S. Office of Management and Budget, Budget of the United States Government, FY2017; Appendix – Small Business Administration, p. 1223, at https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/sba.pdf.

For further analysis, see CRS Report R40860, Small Business Size Standards: A Historical Analysis of Contemporary Issues, by [author name scrubbed].

13 C.F.R. §120.100; and 13 C.F.R. §120.101. A list of ineligible businesses, such as nonprofit businesses, insurance companies, and businesses deriving more than one-third of gross annual revenue from legal gambling activities, is contained in 13 C.F.R. §120.110.

13 C.F.R. §120.150.

13 C.F.R. §120.120.

13 C.F.R. §120.130; and SBA, "Use of 7(a) Loan Proceeds," at http://www.sba.gov/content/use-7a-loan-proceeds.

SBA, "SBA Lending Statistics for Major Programs (as of 9/30/2015)," at https://www.sba.gov/sites/default/files/aboutsbaarticle/WebsiteReport_asof_09_30_2015.pdf.

13 C.F.R. §120.212. A portion of a 7(a) loan used to acquire or improve real property may have a term of 25 years plus an additional period needed to complete the construction or improvements.

13 C.F.R. §120.213.

For fixed interest rates, the SBA first calculates a fixed base rate using the 30 day London Interbank Offered Rate (LIBOR) in effect on the first business day of the month as published in a national financial newspaper published each business day, adds to that 300 basis points (3%) and the average of the 5-year and 10-year LIBOR swap rates in effect on the first business day of the month as published in a national financial newspaper published each business day. For 7(a) fixed loans with maturities of less than seven years, the SBA adds 2.25% to the fixed base rate to arrive at the maximum allowable fixed rate. For 7(a) fixed loans with maturities of seven years or longer, the SBA adds 2.75% to the fixed base rate to arrive at the maximum allowable fixed rate. Lenders may increase the maximum fixed interest rate allowed by an additional 1% if the fixed rate loan is over $25,000 but not exceeding $50,000, and by an additional 2% if the fixed rate loan is $25,000 or less. See SBA, "Business Loan Program Maximum Allowable Fixed Rate," 74 Federal Register 50263-50264, September 30, 2009.

Colson Services Corp., "SBA Base Rates," New York, at http://www.colsonservices.com/main/news.shtml.

Ibid; and SBA, "Welcome Lenders," at https://www.sba.gov/for-lenders.

SBA, "7(a) Loan Program: Terms and Conditions," at https://www.sba.gov/offices/headquarters/oca/resources/13022.

SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), p. 167, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf.

Ibid.

Ibid., p. 166. "Net book value" is defined as an asset's original price minus depreciation and amortization. New machinery and equipment may be valued at 75% of Net Book Value, or 80% with an Orderly Liquidation Appraisal minus any prior liens for the calculation of "fully-secured." Used or existing machinery and equipment may be valued at 50% of Net Book Value or 80% with an Orderly Liquidation Appraisal minus any prior liens for the calculation of "fully-secured." Real estate can be valued supported at 85% of the value for the calculation of "fully-secured." If the loan will be secured by the fixed assets and the valuation of fixed assets is greater than their depreciated value (net book value), an independent appraisal by a qualified individual must be obtained by the lender to support the higher valuation.

Ibid., p. 165.

13 C.F.R. §120.410.

SBA, Fiscal Year 2017 Congressional Budget Justification and FY 2015 Annual Performance Report, p. 34. There were 2,476 active 7(a) lenders in FY2012, 2,345 in FY2013, and 2,244 in FY2014.

U.S. Congress, Senate Select Committee on Small Business, SBA Loan Oversight, hearing on SBA loan oversight, 96^th Cong., 1^st sess., September 18, 1997 (Washington: GPO, 1997), p. 31; and U.S. General Accounting Office, SBA's Pilot Programs to Improve Guaranty Loan Procedures Need Further Development, CED-81-25, February 2, 1981, p. 7, at http://www.gao.gov/assets/140/131789.pdf; and U.S. General Accounting Office, SBA's Certified Lenders Program Falls Short of Expectations, RCED-83-99, June 7, 1983, p. 1, at http://www.gao.gov/assets/150/140126.pdf.

SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), p. 19, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf.

SBA, Office of Congressional and Legislative Affairs, correspondence with the author, November 21, 2013.

U.S. General Accounting Office, SBA's Certified Lenders Program Falls Short of Expectations, RCED-83-99, June 7, 1983, p. 3, at http://www.gao.gov/assets/150/140126.pdf.

U.S. General Accounting Office, Small Business: Analysis of SBA's Preferred Lenders Program, GAO/RCED-92-124, May 15, 1992, pp. 1-4, http://www.gao.gov/assets/220/216229.pdf.

SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), pp. 21-22, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf.

PLP lenders approved 16,549 7(a) loans totaling $15.1 billion in FY2015; 12,570 7(a) loans totaling $11.7 billion in FY2014, 13,457 7(a) loans totaling $10.4 billion in FY2013, and 12,472 7(a) loans totaling $8.4 billion in FY2012. See SBA, "SBA Lending Statistics for Major Programs (as of 9/30/2015)," at https://www.sba.gov/sites/default/files/aboutsbaarticle/WebsiteReport_asof_09_30_2015.pdf.

SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), pp. 28-29, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf.

Ibid., p. 195.

GAO, Small Business Administration: Opportunities Exist to Build on Leadership's Efforts to Improve Agency Performance and Employee Morale, GAO-08-995, September 24, 2008, p. 3, at http://www.gao.gov/new.items/d08995.pdf.

SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), p. 163, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf.

The SBA's credit scoring requirement was initially required of Small Loan Advantage loans, effective June 1, 2012. See SBA, "SBA Information Notice: Revised and Expanded Small Loan Advantage – Changes Incorporated into SOP 50 10 5(E)," May 25, 2012, at https://www.sba.gov/content/revised-and-expanded-small-loan-advantage-changes-incorporated-sop-50-10-5e. The SBA's credit scoring requirement was expanded to all non-express 7(a) loans of $350,000 or less on January 1, 2014. See SBA, "SOP 50 10 5(F): Lender and Development Company Loan Programs," (effective January 1, 2014), p. 161, at https://www.sba.gov/sites/default/files/Clean%20FINAL%20SOP%2050%2010%205%20%28F%29.pdf. The SBA calculates the credit score based on a combination of consumer credit bureau data, business bureau data, borrower financials, and application data. The minimum acceptable credit score is based on the lower end of the risk profile of the current SBA portfolio and may be adjusted up or down from time to time.

If the PLP lender indicates that the loan is eligible to be processed under the PLP lender's delegated authority, the lender is also certifying that SBA Form 1920 has been completed, signed, dated, and filed in the loan file.

Ibid., p. 203.

Ibid., pp. 196-197.

SBA, "SBA Form 1919: Borrower Information Form for use with all 7(a) Programs," at https://www.sba.gov/sites/default/files/forms/SBA%201919_SSN_1.PDF.

SBA, "SBA Form 912: Statement of Personal History," at https://www.sba.gov/sites/default/files/forms/SBA%20%20Form%20912%20%202-13.pdf. The lender is required to process a background check and character determination if the borrower has been arrested in the past six months for any criminal offense or if the borrower has ever been convicted, plead guilty, plead nolo contender, been placed on pretrial diversion, or been placed on any form of parole or probation (including probation before judgment) of any criminal offense.

SBA, "SBA Form 159: Fee Disclosure and Compensation Agreement," at https://www.sba.gov/sites/default/files/forms/SBA_159_7a.pdf.

SBA, "SBA Form 601: Agreement of Compliance," at https://www.sba.gov/sites/default/files/forms/SBA%20601.pdf.

SBA, "SBA Form 1920: Lenders Application for Guaranty for all 7(a) Programs," at https://www.sba.gov/sites/default/files/forms/SBA%201920_1.pdf.

SBA, "Standard 7(a) LGPC 10-Tab Submission Instructions," at https://www.sba.gov/sites/default/files/files/LGPC%2010-Tab%20Template_20140313.pdf.

SBA, "SBA Form 1846: Statement Regarding Lobbying," at https://www.sba.gov/sites/default/files/forms/bank_sba1846.pdf.

U.S. Office of Management and Budget, "Standard Form LLL: Disclosure of Lobbying Activities," at https://www.whitehouse.gov/sites/default/files/omb/grants/sflllin.pdf.

For loans of up to $350,000, if a schedule of collateral is not included, the lender must provide collateral and lienholder information to the Standard 7(a) Loan Guaranty Processing Center to complete the loan authorization.

SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), p. 164, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf.

Ibid., p. 196.

P.L. 93-386, the Small Business Amendments of 1974, provided the SBA authorization to charge fees to "cover administrative expenses and probable losses" on its loan guaranty programs.

P.L. 108-447, the Consolidated Appropriations Act, 2005 (Division K–Small Business, Section 102. Loan Guaranty Fees) established the SBA's current maximum up-front guaranty fees as: up to 2% of the SBA guaranteed portion of 7(a) loans of $150,000 or less, up to 3% of the SBA guaranteed portion of 7(a) loans exceeding $150,000 but not more than $700,000, and up to 3.5% of the SBA guaranteed portion of 7(a) loans exceeding $700,000. In addition, 7(a) loans with an SBA guaranteed portion in excess of $1 million can be charged an additional 0.25% guaranty fee on the guaranteed amount in excess of $1 million. See 15 U.S.C. §636(a)(18)(a); and SBA, "Small Business Jobs Act: Implementation of Conforming and Technical Amendments," 76 Federal Register 63544-63545, October 13, 2011.

SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), p. 141, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf. The guaranty fee is refundable if the loan application is withdrawn prior to SBA approval, the SBA declines to guarantee the loan, or the SBA substantially changes the loan terms and those terms are unacceptable to the lender. Also, because the SBA does not approve or decline the credit for PLP loans, PLP lenders are required to send the guaranty fee electronically to http://www.pay.gov within 10 business days from the date the loan number is assigned and before the lender signs the Authorization for the SBA. For SBA Express and Export Express loans with a maturity of 12 months or less, the lender does not send the fee to the processing center with the request for loan number. The lender must pay the guaranty fee within 10 business days from the date the loan number is assigned and before the lender signs the Authorization for SBA.

15 U.S.C. §636(a)(23)(a).

15 U.S.C. §636(a)(23)(b).

SBA, "SBA Information Notice: 7(a) and 504 Fees Effective on October 1, 2013," at https://www.sba.gov/sites/default/files/5000-1288.pdf; SBA, "SBA Information Notice: 7(a) and 504 Fees Effective October 1, 2014," at https://www.sba.gov/sites/default/files/lender_notices/5000-1318.pdf; and SBA, "SBA Information Notice: 7(a) and 504 Fees Effective on October 1, 2015," September 28, 2015, at https://www.sba.gov/sites/default/files/lender_notices/5000-1352.pdf.

SBA, Fiscal Year 2014 Congressional Budget Justification and FY 2012 Annual Performance Report, p. 36.

U.S. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2014: Small Business Administration, p. 164, at https://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/business.pdf.

SBA, "SBA Lending Statistics for Major Programs (as of 9/30/2015)," at https://www.sba.gov/sites/default/files/aboutsbaarticle/WebsiteReport_asof_09_30_2015.pdf.

SBA, FY 2014 Congressional Budget Justification and FY 2012 Annual Performance Report, p. 4.

For example, see Barry Pineles, Chief Counsel, House Committee on Small Business, "Hearing Memorandum on The Budget Outlook for Small Business Administration," April 18, 2013, pp. 11-12, at http://smallbusiness.house.gov/uploadedfiles/revised_hearing_memo_4-24-2013.pdf.

13 C.F.R. §120.221.

Ibid.; and SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), pp. 145, 149, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf.

13 C.F.R. §120.222. A commitment fee may be charged for a loan made under the Export Working Capital Loan Program.

13 C.F.R. §120.221; and SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), pp. 145, 149, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf.

13 C.F.R. §120.223; and SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), pp. 146, 150, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf.

SBA, Press Office, "Recovery Loan Incentives Spurred Continued Rebound in SBA Lending in FY2010," October 4, 2010, at https://www.sba.gov/content/recovery-loan-incentives-spurred-continued-rebound-sba-lending-fy2010; and SBA, "Jobs Act Supported More Than $12 Billion in SBA Lending to Small Businesses in Just Three Months," January 3, 2011, at https://www.sba.gov/content/jobs-act-supported-more-12-billion-sba-lending-small-businesses-just-three-months.

P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), enacted on February 17, 2009, provided the SBA $375 million to temporarily reduce fees in the 7(a) and 504/CDC loan guaranty programs, and increase the 7(a) program's maximum loan guaranty percentage to 90% for all standard 7(a) loans through September 30, 2010, or until available funds were exhausted. Due to the increased demand for 7(a) loans, available funding was anticipated to be exhausted in early January 2010. P.L. 111-118, the Department of Defense Appropriations Act, 2010, provided the SBA $125 million to continue the fee subsidies and 90% maximum loan guaranty percentage through February 28, 2010. P.L. 111-144, the Temporary Extension Act of 2010, provided the SBA $60 million to continue the fee subsidies and 90% maximum loan guaranty percentage through March 28, 2010. P.L. 111-150, an act to extend the Small Business Loan Guarantee Program, and for other purposes, provided the SBA authority to reprogram $40 million in previously appropriated funds to continue the fee subsidies and 90% maximum loan guaranty percentage through April 30, 2010. P.L. 111-157, the Continuing Extension Act of 2010, provided the SBA $80 million to continue the SBA's fee subsidies and 90% maximum loan guaranty percentage through May 31, 2010. The fee subsidies and 90% loan guaranty percentage expired on May 31, 2010. P.L. 111-240, the Small Business Jobs Act of 2010, enacted on September 27, 2010, provided the SBA $505 million (plus an additional $5 million for related administrative expenses) to reinstate the fee subsidies and 90% maximum loan guaranty percentage through December 31, 2010, or until available funds were exhausted. P.L. 111-322, the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to use any funds remaining from the Small Business Jobs Act of 2010 to continue the fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until the available funding was exhausted. The funds were exhausted on January 3, 2011.

A small portion of the increase in FY2013 may also have been a result of an increase in 7(a) loan applications during the final two weeks of FY2013 as borrowers and lenders anticipated a possible federal government shutdown starting on October 1, 2013 (the first day of FY2014). See J.D. Harrison, "Shutdown yields slowdown: SBA returns to hundreds of small-business loans," The Washington Post, October 18, 2013. Prior to September 13, 2013, the SBA approved, on average, about 857 loans totaling $320,787 per week during FY2013 (42,851 loan approvals totaling $16,039,363 as of September 13, 2013, the 50^th week of the fiscal year). The SBA approved 3,548 loans totaling $1,828,918 during the final two weeks (and a day) of FY2013. See SBA, "SBA Lending Statistics for Major Programs (as of 9/13/2013, 9/20/2013, 9/27/2013, 9/30/2013, and 9/30/2014)," at https://www.sba.gov/about-sba/sba-newsroom/weekly-lending-report. The federal government shutdown subsequently occurred on October 1, 2013, and continued through October 16, 2013.

SBA, Office of Advocacy, "Frequently Asked Questions About Small Business Finance," February 2014, at https://www.sba.gov/sites/default/files/2014_Finance_FAQ.pdf.

SBA, "Table 1 ─ Unpaid Principal Balance By Program," at https://www.sba.gov/sites/default/files/files/WDS_Table1_UPB_Report.pdf.

SBA, FY 2016 Congressional Budget Justification and FY 2014 Annual Performance Report, p. 16.

SBA, FY 2017 Congressional Budget Justification and FY 2015 Annual Performance Report, p. 14.

Ibid., p. 24.

Christopher Hayes, An Assessment of Small Business Administration Loan and Investment Performance: Survey of Assisted Businesses (Washington, DC: The Urban Institute, 2008), p. 3, at http://www.urban.org/UploadedPDF/411599_assisted_business_survey.pdf. The percentage total exceeds 100 because recipients were allowed to name more than one use for the loan proceeds.

Ibid., p. 5.

Ibid.

Kenneth Temkin, Brett Theodos, with Kerstin Gentsch, Competitive and Special Competitive Opportunity Gap Analysis of the 7(A) and 504 Programs (Washington, DC: The Urban Institute, 2008), p. 13, at http://www.urban.org/UploadedPDF/411596_504_gap_analysis.pdf.

SBA, "SBA Lending Statistics for Major Programs (as of 9/30/2015)," at https://www.sba.gov/sites/default/files/aboutsbaarticle/WebsiteReport_asof_09_30_2015.pdf.

Kenneth Temkin, Brett Theodos, with Kerstin Gentsch, Competitive and Special Competitive Opportunity Gap Analysis of the 7(A) and 504 Programs (Washington, DC: The Urban Institute, 2008), p. 21, at http://www.urban.org/UploadedPDF/411596_504_gap_analysis.pdf.

For further analysis, see CRS Report R40985, Small Business: Access to Capital and Job Creation, by [author name scrubbed].

P.L. 110-343, the Emergency Economic Stabilization Act of 2008.

U.S. Department of the Treasury, Troubled Assets Relief Program Monthly Report–September 2015, October 9, 2015, p. 5, at http://www.treasury.gov/initiatives/financial-stability/reports/Documents/September%202015%20Monthly%20Report%20to%20Congress.pdf. On March 16, 2009, President Obama announced that the Department of the Treasury would use TARP funds to purchase up to $15 billion of SBA-guaranteed loans to "immediately unfreeze the secondary market for SBA loans and increase the liquidity of community banks." The plan was deferred after it met resistance from lenders. Some lenders objected to TARP's requirement that participating lenders comply with executive compensation limits and issue warrants to the federal government. Smaller community banks objected to the program's paperwork requirements, such as the provision of a small-business lending plan and quarterly reports. See The White House, "Remarks by the President to Small Business Owners, Community Leaders, and Members of Congress," March 16, 2009, at https://www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-small-business-owners/.

P.L. 111-240, the Small Business Jobs Act of 2010, §1111. Section 7(A) Business Loans. The Senate had adopted H.R. 4213, the American Workers, State, and Business Relief Act of 2010, on March 10, 2010, by a 62-36 vote. It would have provided $560 million to extend the fee reductions and 90% loan guarantee limit through December 31, 2010. The House approved an amended version of the bill, renamed the American Jobs and Closing Tax Loopholes Act of 2010, on May 28, 2010, by a 245-171 vote. It would have provided $505 million to extend the fee reductions and 90% loan guarantee limit through December 31, 2010. The extension provision was subsequently removed from the bill, which became P.L. 111-205, the Unemployment Compensation Extension Act of 2010.

SBA, "Administration Announces New Small Business Commercial Real Estate and Working Capital Programs," February 5, 2010, at http://www.illinois.gov/dceo/SmallBizAssistance/CenterConnect/WeeklyConnect/SBA%20Fact%20Sheet%20CRE%20REFI%20and%20WORKING%20CAPITAL.docx.

Susan Eckerly, "NFIB Responds to President's Small Business Lending Initiatives," Washington, DC, October 21, 2009, at http://www.nfib.com/newsroom/newsroom-item/cmsid/50080/; and NFIB, "Government Spending," Washington, DC, at http://www.nfib.com/issues-elections/issues-elections-item/cmsid/49051/.

SBA, Office of Inspector General, "FY2001 Agency Management Challenges," December 1, 2000, pp. 15-17.

Ibid., p. 17.

SBA, Office of Inspector General, "Improvement is Needed to Ensure Effective Quality Control at Loan Operation Centers," January 17, 2014, p. 1, at https://www.sba.gov/sites/default/files/Audit%20Evaluation%20Report%2014-08%20Improvement%20is%20Needed%20to%20Ensure%20Effective%20Quality%20Control%20at%20Loan%20Operation%20Centers.pdf.

SBA, Office of Lender Oversight, "SOP 51-00: On-Site Lender Reviews/Examinations," (effective September 28, 2006), at https://www.sba.gov/sites/default/files/sop_51-00-pdf.pdf. Note: Although on-site reviews are generally conducted on all 7(a) lenders with outstanding balances on the SBA-guaranteed portions of its loan portfolio amounting to $10 million or more, the SBA may conduct on-site reviews of any SBA lender, as it considers necessary.

SBA, FY 2009 Congressional Budget Justification and FY 2007 Annual Performance Report, p. 37.

SBA, Office of Financial Assistance, "SOP 50-10(5): Lender and Development Company Loan Programs," (effective August 1, 2008), at https://www.sba.gov/sites/default/files/sop_51-00-pdf.pdf.

SBA, Office of Inspector General, "Improvement is Needed to Ensure Effective Quality Control at Loan Operation Centers," January 17, 2014, p. 15, at https://www.sba.gov/sites/default/files/Audit%20Evaluation%20Report%2014-08%20Improvement%20is%20Needed%20to%20Ensure%20Effective%20Quality%20Control%20at%20Loan%20Operation%20Centers.pdf.

Ibid. The Standard 7(a) Loan Guaranty Processing Center, located in Citrus Heights, CA and Hazard, KY, processes 7(a) loan guaranty applications and conducts limiting servicing of 7(a) loans. The Commercial Loan Service Center, located in Fresno, CA and Little Rock, AR, is responsible for loan servicing actions (after loans are disbursed), SBAExpress loan purchases, and 504/CDC loan guaranty program liquidation. The National Guaranty Purchase Center, located in Herndon, VA, processes 7(a) guaranty purchase requests and conducts liquidation oversight.

SBA, "Lender Oversight Program," 73 Federal Register 75498-75527, December 11, 2008.

SBA, Office of Inspector General, "Improvement is Needed to Ensure Effective Quality Control at Loan Operation Centers," January 17, 2014, p. 3, at https://www.sba.gov/sites/default/files/Audit%20Evaluation%20Report%2014-08%20Improvement%20is%20Needed%20to%20Ensure%20Effective%20Quality%20Control%20at%20Loan%20Operation%20Centers.pdf. The quality control program is led in each center by a designated quality control specialist. Each center is tasked with establishing specific quality review activities and targets, and creating a center specific quality program guide to detail (1) the center's activities that require quality reviews, (2) the number of reviews required (daily or monthly) by type of transaction, (3) compliance goals, and (4) the required corrective action activities. See ibid, pp. 6, 16.

SBA, Fiscal Year 2011 Congressional Budget Justification and FY 2009 Annual Performance Report, p. 6. According to the SBA, "The Loan/Lender Monitoring System focuses on 7(a) lenders, certified development companies and microloan intermediaries that pose the most risk to the SBA. In addition to overseeing lenders, the L/LMS provides policy, portfolio and program analysis. The Office of Credit Risk Management (OCRM) is divided into four teams: large lender oversight, small lender oversight, lender transaction, and program and policy analysis. The differentiation of lender oversight by lender size reflects the different forms of oversight needed for large lenders versus small lenders." See ibid., p. 43.

SBA, Office of Inspector General, "Report on the Most Serious Management and Performance Challenges Facing the Small Business Administration In Fiscal Year 2015," October 17, 2014, p. 5, at https://www.sba.gov/sites/default/files/oig/SBA%20OIG%20Report%2015-01%20-%20FY%202015%20Management%20Challenges_0.pdf.

Ibid.

SBA, Office of Inspector General, "Report on the Most Serious Management and Performance Challenges Facing the Small Business Administration In Fiscal Year 2016," October 15, 2015, p. 5, at https://www.sba.gov/sites/default/files/oig/FY_2016_Management_Challenges.pdf.

See SBA, Office of Inspector General, "Improvement is Needed to Ensure Effective Quality Control at Loan Operation Centers," January 17, 2014, at https://www.sba.gov/sites/default/files/Audit%20Evaluation%20Report%2014-08%20Improvement%20is%20Needed%20to%20Ensure%20Effective%20Quality%20Control%20at%20Loan%20Operation%20Centers.pdf; SBA, Office of Inspector General, "Improvement is Needed in SBA's Oversight of Lender Service Providers," at https://www.sba.gov/sites/default/files/oig/OIG_Report_15-06_Lender_Service_Providers.pdf; SBA, Office of Inspector General, "Significant Opportunities Exist to Improve the Management of the 7(a) loan Guaranty Approval Process," June 6, 2014, p. 2, at https://www.sba.gov/sites/default/files/%5Bc%5D%20Audit%20Report%2014-13.pdf; and SBA, Office of Inspector General, "SBA Needs to Improve its Oversight of Loan Agents," September 25, 2015, at https://www.sba.gov/sites/default/files/oig/Report_15-6_SBA_Needs_to_Improve_Its_Oversight_of_Loan_Agents.pdf.

SBA, Office of Inspector General, "Report on the Most Serious Management and Performance Challenges Facing the Small Business Administration In Fiscal Year 2015," October 17, 2014, p. 5, at https://www.sba.gov/sites/default/files/oig/SBA%20OIG%20Report%2015-01%20-%20FY%202015%20Management%20Challenges_0.pdf.

SBA, Office of Inspector General, "Improvement is Needed to Ensure Effective Quality Control at Loan Operation Centers," January 17, 2014, pp. 18-19, at https://www.sba.gov/sites/default/files/Audit%20Evaluation%20Report%2014-08%20Improvement%20is%20Needed%20to%20Ensure%20Effective%20Quality%20Control%20at%20Loan%20Operation%20Centers.pdf.

GAO, Small Business Administration: 7(a) Loan Program Needs Additional Performance Measures, GAO-08-226T, November 1, 2007, p. 2, at http://www.gao.gov/new.items/d08226t.pdf.

SBA, Office of the Inspector General, SBA's Administration of the Microloan Program under the Recovery Act, December 28, 2009, p. 6, at https://www.sba.gov/sites/default/files/om10-10.pdf.

Ibid.

Ibid., p. 7.

GAO, Small Business Administration: 7(a) Loan Program Needs Additional Performance Measures, GAO-08-226T, November 1, 2007, p. 8, at http://www.gao.gov/new.items/d08226t.pdf.

SBA, Office of the Inspector General, SBA's Administration of the Microloan Program under the Recovery Act, December 28, 2009, p. 9, at https://www.sba.gov/sites/default/files/om10-10.pdf.

SBA, FY 2017 Congressional Budget Justification and FY 2015 Annual Performance Report, p. 28.

SBA, "Administration Announces New Small Business Commercial Real Estate and Working Capital Programs," February 5, 2010, at http://www.illinois.gov/dceo/SmallBizAssistance/CenterConnect/WeeklyConnect/SBA%20Fact%20Sheet%20CRE%20REFI%20and%20WORKING%20CAPITAL.docx.

Ibid.

Ibid.

U.S. Congress, House Committee on Small Business, Small Business Financing and Investment Act of 2009, report to accompany H.R. 3854, 111^th Cong., 2^nd sess., October 26, 2009, H.Rept. 111-315 (Washington: GPO, 2009), p. 1.

Robb Mandelbaum, "Why Won't the S.B.A. Lend Directly to Small Businesses?" New York Times, March 10, 2010, at http://boss.blogs.nytimes.com/2010/03/10/why-wont-the-s-b-a-loan-directly-to-small-businesses/.

Susan Eckerly, "NFIB Responds to President's Small Business Lending Initiatives," Washington, DC, October 21, 2009, at http://www.nfib.com/newsroom/newsroom-item/cmsid/50080/; and NFIB, "Government Spending," Washington, DC, at http://www.nfib.com/issues-elections/issues-elections-item/cmsid/49051/.

SBA, "Recovery Act Agency Plan," May 15, 2009, at https://www.sba.gov/sites/default/files/recovery_act_reports/sba_recovery_act_plan.pdf.

P.L. 111-240, the Small Business Jobs Act of 2010, Section 1122. Low-Interest Refinancing Under the Local Development Business Loan Program.

For further analysis of P.L. 111-240, the Small Business Jobs Act of 2010, see CRS Report R41385, Small Business Legislation During the 111th Congress, by [author name scrubbed] and [author name scrubbed]. For further analysis of the Small Business Lending Fund, see CRS Report R42045, The Small Business Lending Fund, by [author name scrubbed]. For further analysis of the State Small Business Credit Initiative, see CRS Report R42581, State Small Business Credit Initiative: Implementation and Funding Issues, by [author name scrubbed].

U.S. Congress, House Committee on Small Business, Veterans Entrepreneurship Act of 2015, report to accompany H.R. 2499, 114^th Cong., 1^st sess., June 25, 2015, H.Rept. 114-187 (Washington: GPO, 2015), p. 9.

Several bills have been introduced during the 114^th Congress to increase the 7(a) program's authorization limit (on disbursements). For example, S. 1001, the Small Business Lending Reauthorization Act of 2015, would increase the 7(a) program's authorization limit from $18.75 billion in FY2015 to $20.5 billion in FY2015 and $23.5 billion in FY2016. H.R. 3132, to increase the amount of funding available for fiscal year 2015 for certain general business loans authorized under the Small Business Act, would increase the 7(a) program's authorization limit from $18.75 billion in FY2015 to $23.5 billion.

Letter from Maria Contreras-Sweet, SBA Administrator, to The Honorable John Boozman, Chair, Subcommittee on Financial Services and General Government, House Committee on Appropriations, June 25, 2015, at https://www.sba.gov/sites/default/files/7a-authotization-cap-letter-Chairman_Boozman.pdf.

Ibid.

Ibid.

SBA, "SBA Information Notice: 7(a) Loan Program Authorization Level," July 22, 2015, at https://www.sba.gov/sites/default/files/lender_notices/5000-1344.pdf.

Ibid.

Ibid.

SBA, "SBA Information Notice: 7(a) Loan Program Authorization Level," July 28, 2015, at https://www.sba.gov/sites/default/files/lender_notices/5000-1346.pdf.

Sec. 521. For loans and loan guarantees that do not require budget authority and the program level has been established in this Act, the Administrator of the Small Business Administration may increase the program level for such loans and loan guarantees by not more than 15 percent: Provided, That prior to the Administrator implementing such an increase, the Administrator notifies, in writing, the Committees on Appropriations and Small Business of both Houses of Congress at least 15 days in advance. See U.S. Office of Management and Budget, Budget of the United States Government, FY2017; Appendix – Small Business Administration, p. 1223, at https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/sba.pdf.

Representative Nydia Velázquez, "Small Business Financing and Investment Act of 2009," House debate, Congressional Record, daily edition, vol. 155, no. 159 (October 29, 2009), pp. H12074, H12075; Senator Mary Landrieu, "Statements on Introduced Bills and Joint Resolutions," remarks in the Senate, Congressional Record, daily edition, vol. 155, no. 185 (December 10, 2009), p. S12910; and The White House, "Remarks by the President on Job Creation and Economic Growth," December 8, 2009, at http://www.whitehouse.gov/the-press-office/remarks-president-job-creation-and-economic-growth.

Susan Eckerly, "NFIB Responds to President's Small Business Lending Initiatives," Washington, DC, October 21, 2009, at http://www.nfib.com/newsroom/newsroom-item/cmsid/50080/; and NFIB, "Government Spending," Washington, DC, at http://www.nfib.com/issues-elections/issues-elections-item/cmsid/49051/.

Shelli B. Rossman and Brett Theodos, with Rachel Brash, Megan Gallagher, Christopher Hayes, and Kenneth Temkin, Key Findings from the Evaluation of the Small Business Administration's Loan and Investment Programs: Executive Summary (Washington, DC: The Urban Institute, January 2008), p. 58, at http://www.urban.org/UploadedPDF/411602_executive_summary.pdf.

Ibid.

GAO, Small Business Administration: 7(a) Loan Program Needs Additional Performance Measures, GAO-08-226T, November 1, 2007, p. 2, at http://www.gao.gov/new.items/d08226t.pdf; and SBA, Office of the Inspector General, SBA's Administration of the Microloan Program under the Recovery Act, December 28, 2009, pp. 6-7, at https://www.sba.gov/sites/default/files/om10-10.pdf.

The SBAExpress program was initially called FA$TRAK and offered a 50% loan guaranty on loans of up to $100,000. FA$TRAK's program guidance was issued on March 6, 1995. See SBA, "FA$TRAK," 60 Federal Register 12271-12275, March 6, 1995. A brief history of the SBAExpress program is provided in SBA, "SBAExpress Program Guide," (effective October 1, 2002), p. 3, at https://www.sba.gov/sites/default/files/files/sba_elending_clc_sbaexpress.pdf.

SBA, "The SBA Express Pilot Program: Inspection Report," June 1998, p. 3.

SBA, "SBA Lending Statistics for Major Programs (as of 9/30/2015)," at https://www.sba.gov/sites/default/files/aboutsbaarticle/WebsiteReport_asof_09_30_2015.pdf.

Ibid.

SBA, "SBAExpress," at https://www.sba.gov/content/sba-express.

Ibid.

SBA, "SBA Announces New Measures to Help Get Small Business Loans Into the Hands of Veterans," November 8, 2013, at https://www.sba.gov/content/sba-announces-new-measures-help-get-small-business-loans-hands-veterans.

Eligible businesses were required to be owned and controlled (51% or more) by one or more of the following groups: veteran, active duty military participating in the military's Transition Assistance Program, reservist or national guard member or a spouse of any of these groups, a widowed spouse of a servicemember who died while in service, or a widowed spouse of a veteran who died of a service-connected disability. See SBA, "SOP 50 10 5(E): Lender and Development Company Loan Programs," (effective June 1, 2012), pp. 83, 127, at https://www.sba.gov/sites/default/files/SOP%2050%2010%205%28E%29%20%285-16-2012%29%20clean.pdf.

SBA, Office of Congressional and Legislative Affairs, correspondence with the author, February 21, 2014.

SBA, "Announcement of SBA Export Express – a New Pilot Loan Guaranty Program for Exporters," 65 Federal Register 60491, October 11, 2000; and SBA, "Export Express Pilot Program," 70 Federal Register 56962-56963, September 29, 2005.

The 12-month in business requirement can be waived if "the applicant's key personnel have clearly demonstrated export expertise and substantial previous successful business experience, and the lender processes the Export Express loan using conventional commercial loan underwriting procedures and does not rely solely on credit scoring or credit matrices to approve the loan." See SBA, "SOP 50 10 5(H): Lender and Development Company Loan Programs," (effective May 1, 2015), p. 108, at https://www.sba.gov/sites/default/files/sops/SOP_50_10_5_H_FINAL_FINAL_CLEAN_5-1-15.pdf.

Ibid., pp. 108, 122.

SBA, "Export Express Program Lenders," at https://www.sba.gov/content/lenders-participating-sba%27s-export-express-program-0.

SBA, Office of Systems and Performance Management, correspondence with the author, November 19, 2015.

SBA, "Small Loan Advantage," at https://www.sba.gov/offices/headquarters/oca/resources/14835; and SBA, "SBA Announces New Initiatives Aimed at Increasing Lending in Underserved Communities," December 15, 2010, at https://www.sba.gov/content/sba-announces-new-initiatives-aimed-increasing-lending-underserved-communities.

The SBA's Small Loan Advantage (SLA) program also became operational on February 15, 2011. It provided a streamlined application process for 7(a) loans of up to $350,000 (initially $250,000) if the loan received an acceptable credit score from the SBA prior to the loan being submitted for processing. The program provided the same loan guaranty rate as that of the 7(a) program on loan amounts up to $350,000 (85% for loans up to $150,000 and 75% for those greater than $150,000) and loan proceeds could be used for the same purposes as those of the 7(a) program. The borrower's interest rate was negotiable with the lender, subject to the same maximum rate limitations as those of the 7(a) program. Initially, the SLA program was restricted to PLP lenders. The program was expanded to all SBA lenders on June 1, 2012. The SBA adopted the SLA application process as the model for processing all non-express 7(a) loans of $350,000 or less, effective January 1, 2014.

Ibid; and SBA, "Community Advantage Pilot Program," 80 Federal Register 80873, December 28, 2015.

The Obama Administration's Promise Zone initiative "seeks to partner with local communities and businesses to create jobs, increase economic security, expand educational opportunities, increase access to quality, affordable housing and improve public safety." The first five Zones are located in San Antonio, Philadelphia, Los Angeles, Southeastern Kentucky, and the Choctaw Nation of Oklahoma. See The White House, Office of the Press Secretary, "Fact Sheet: President Obama's Promise Zones Initiative," at https://www.whitehouse.gov/the-press-office/2014/01/08/fact-sheet-president-obama-s-promise-zones-initiative. Also see SBA, "Advantage Loan Initiatives," at http://www.sba.gov/advantage; SBA, "Community Advantage Participant Guide," December 28, 2015, p. 4, at https://www.sba.gov/sites/default/files/files/CA-Participant-Guide-4-December-28-2015.pdf; and SBA, "Community Advantage Pilot Program," 80 Federal Register 80874, December 28, 2015.

SBA, Office of Congressional and Legislative Affairs, correspondence with the author, October 19, 2015.

SBA, "Advantage Loan Initiatives," at https://www.sba.gov/advantage.

SBA, "Community Advantage," at https://www.sba.gov/offices/headquarters/oca/resources/14836.