Small Business Administration 7(a) Loan
Guaranty Program
Updated June 21, 2021
Congressional Research Service
https://crsreports.congress.gov
R41146

link to page 38 link to page 44 Small Business Administration 7(a) Loan Guaranty Program

Summary
The Smal Business Administration (SBA) administers several programs to support smal
businesses, including loan guaranty programs designed to encourage lenders to provide loans to
smal businesses “that might not otherwise obtain financing on reasonable terms and conditions.”
The SBA’s 7(a) loan guaranty program is the agency’s flagship loan program. It derives its name
from Section 7(a) of the Smal Business Act of 1953 (P.L. 83-163, as amended), which authorizes
the SBA to provide business loans and loan guaranties to American smal businesses.
In FY2020, the SBA approved 42,302 7(a) loans totaling nearly $22.6 bil ion. The average
approved 7(a) loan amount was $533,075.
This report discusses the 7(a) 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 oversight of 7(a) lenders and the program’s lack of
outcome-based performance measures.
This report also examines congressional and SBA actions to enhance smal businesses’ access to
capital, including actions taken during and immediately following the Great Recession (2007-
2009) and, more recently, to address the Coronavirus Disease 2019 (COVID-19) pandemic’s
adverse economic impact on the national economy. For example,
 P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act), among other provisions, created the $349 bil ion (now $806.45 bil ion)
Paycheck Protection Program (PPP) and appropriated $17 bil ion for six-month
payment relief for existing 7(a), 504/CDC, or Microloan borrowers. Loans fully
disbursed up until six months after enactment (until September 27, 2020) were
also eligible for six months of loan payments. The act also temporarily increased
the SBAExpress loan limit from $350,000 to $1 mil ion (reverting to $350,000
on January 1, 2021) and eliminated the zero subsidy requirement to waive
SBAExpress loan fees for veterans.
 P.L. 116-260, the Economic Aid to Hard-Hit Smal Businesses, Nonprofits, and
Venues Act (Division N, Title III of the Consolidated Appropriations Act, 2021),
among other provisions, appropriated $3.5 bil ion to resume monthly payment
relief for 7(a), 504/CDC, and Microloan borrowers, capped at $9,000 per month
per borrower. Payments are dependent on the availability of funds, when the loan
was disbursed, the type of loan received, and the business’s industry. The act also
extended the temporary increase in the SBAExpress loan limit from $350,000 to
$1 mil ion (reverting to $500,000 on October 1, 2021), increased the
SBAExpress guaranty rate for loans of $350,000 or less from 50% to 75% in
FY2021, waived the SBA’s fees for the 7(a) and 504/CDC loan guarantee
programs in FY2021, and increased the 7(a) program’s loan guaranty rate from
85% for loans of $150,000 or less and 75% for loans greater than $150,000 (up to
a maximum guaranty of $3.75 mil ion—75% of $5 mil ion) to 90% in FY2021.
Appendix A provides a brief description of the 7(a) program’s SBAExpress and Community
Advantage programs. Appendix B provides a summary of the CARES Act’s key provisions,
including legislative and regulatory changes to those provisions.
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Small Business Administration Loan
Guaranty Programs
The Smal Business Administration (SBA) administers programs to support smal businesses,
including loan guaranty programs to encourage lenders to provide loans to smal businesses “that
might not otherwise obtain financing on reasonable terms and conditions.”1 The SBA’s 7(a) loan
guaranty program is the agency’s flagship loan program.2 It derives its name from Section 7(a) of
the Smal Business Act of 1953 (P.L. 83-163, as amended), which authorizes the SBA to provide
and guarantee business loans to American smal businesses.
The SBA also administers several 7(a) subprograms that offer streamlined and expedited loan
procedures for particular groups of borrowers, including the SBAExpress and Community
Advantage Pilot programs (see the Appendix A for additional details). Although these
subprograms have their own distinguishing eligibility requirements, terms, and benefits, they
operate under the 7(a) program’s authorization.3
In FY2020, the SBA approved 42,302 7(a) loans totaling nearly $22.6 bil ion. The average
approved 7(a) loan amount was $533,075.4
Congress has always shown a great interest in the 7(a) loan program because of concerns that
smal businesses might be prevented from accessing sufficient capital to enable them to grow and
create jobs. That interest has grown especial y acute in the wake of the Coronavirus Disease 2019
(COVID-19) pandemic’s adverse economic impact on the national economy. For example,
 P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act), among other provisions, created the $349 bil ion (now $806.45 bil ion)
Paycheck Protection Program (PPP) and appropriated $17 bil ion for six-month
payment relief for existing 7(a), 504/CDC, or Microloan borrowers. Loans fully
disbursed (i.e., in a regular servicing status) up until six months after enactment
(until September 27, 2020) were also eligible for six months of loan payments.5
The act also temporarily increased the SBAExpress loan limit from $350,000 to
$1 mil ion (reverting to $350,000 on January 1, 2021) and eliminated the zero
subsidy requirement to waive SBAExpress loan fees for veterans.

1 U.S. Small Business Administration (SBA), Fiscal Year 2010 Congressional Budget Justification, p. 30, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/Congressional_Budget_Justification_2010.pdf.
2 U.S. Congress, House Committee on Small Business, Subcommittee on Finance and T ax, Subcommittee Hearing on
Improving the SBA’s Access to Capital Programs for Our Nation’s Small Business, 110th Cong., 2nd sess., March 5,
2008, H.Hrg. 110-76 (Washington: GPO, 2008), p. 2.
3 SBA, “T ypes of 7(a) Loans,” at https://www.sba.gov/partners/lenders/7a-loan-program/types-7a-loans.
4 SBA, “SBA Lending Statistics for Major Programs (as of 9/30/2020),” at https://www.sba.gov/sites/default/files/
2020-10/WebsiteReport_asof_20200930-508.pdf (hereinafter SBA, “ SBA Lending Statistics for Major Programs (as of
9/30/2020)”). T he 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). T he
amount of 7(a) loans approved annually is typically about 10% to 15% higher than the amount disbursed.
5 Community Advantage Recovery Loans fully disbursed up until October 1, 2020, were eligible for six mo nths of loan
payments. See SBA, “Guidance on the Implementation of the Extension of the Section 1112 Debt Relief Program for
the 7(a) and 504 Loan Programs, as Authorized by Section 325 of the Economic Aid to Hard-Hit Small Businesses,
Nonprofits, and Venues Act,” Procedural Notice 5000-20079, January 19, 2021, at https://www.sba.gov/document/
procedural-notice-5000-20079-guidance-implementation-extension-section-1112-debt-relief-program-7a-504-loan-
programs-authorized.
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Small Business Administration 7(a) Loan Guaranty Program

 P.L. 116-260, the Economic Aid to Hard-Hit Smal Businesses, Nonprofits, and
Venues Act (Division N, Title III of the Consolidated Appropriations Act, 2021),
among other provisions, appropriated $3.5 bil ion to resume monthly payment
relief for 7(a), 504/CDC, and Microloan borrowers, capped at $9,000 per month
per borrower. Payments are dependent on the availability of funds, when the loan
was disbursed, the type of loan received, and the business’s industry.6 The act
also extended the temporary increase in the SBAExpress loan limit from
$350,000 to $1 mil ion (reverting to $500,000 on October 1, 2021), increased the
SBAExpress guaranty rate for loans of $350,000 or less from 50% to 75% in
FY2021, waived the SBA’s fees for the 7(a) and 504/CDC loan guarantee
programs in FY2021, and increased the 7(a) program’s guaranty rate from 85%
for loans of $150,000 or less and 75% for loans greater than $150,000 (up to a
maximum guaranty of $3.75 mil ion—75% of $5 mil ion) to 90% in FY2021.
The smal business relief legislation enacted during the 116th Congress included several
provisions (e.g., fee waivers, increased loan limits, and increased loan guarantee percentages) that
were enacted during the 111th Congress to address the economic slowdown during and
immediately following the Great Recession (2007-2009). Back then, many Members of Congress
argued that the SBA should be provided additional resources to assist smal businesses in
acquiring capital necessary to start, continue, or expand operations with the expectation that in so
doing smal businesses would retain and create jobs. 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 smal businesses further economic growth and job creation.
A major difference between then and now is that given COVID-19’s widespread adverse
economic impact, resulting primarily from physical distancing and the resulting decrease in
consumer spending, there is an added emphasis now on SBA loan deferrals, loan forgiveness, and
expanded eligibility, including, for the first time, specified types of nonprofit organizations . There
has also been less concern about fiscal restraint than during the 111th Congress.
This report examines the 7(a) 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.
In addition, recent congressional and SBA actions to enhance smal businesses’ access to capital
are examined, including actions taken during and immediately following the Great Recession
(2007-2009) and, more recently, to address the COVID-19 pandemic’s adverse economic impact
on the national economy.

6 T he SBA has announced that the $3.5 billion appropriation will enable the agency to provide two additional monthly
payments on 7(a) and 504/CDC loans that were in repayment before March 27, 2020, starting with the next payment
due on or after February 1, 2021. After the first two monthly payments are provided, businesses with an SBA
Community Advantage loan, Microloan, o r operating in specified economically hard-hit industries will receive an
additional three monthly payments. Loans approved from February 1, 2021, through September 30, 2021, will receive
three monthly payments beginning with the first payment due. See SBA, “ Adjustment to Number of Months of Section
1112 Payments in the 7(a), 504 and Microloan Programs Due to Insufficiency of Funds,” SBA Procedural Notice,
5000-20095, February 16, 2021, at https://www.sba.gov/document/procedural-notice-5000-20095-adjustment -number-
months-section-1112-payments-7a-504-microloan-programs-due-insufficiency-funds.
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Borrower Eligibility Standards and Program
Requirements
The following eligibility standards and program requirements apply to the 7(a) program. The
CARES Act created separate eligibility standards and program requirements for the Payment
Protection Program (PPP), including, for the first time, eligibility for nonprofit organizations (see
Appendix B for the CARES Act’s major provisions).7
Borrower Eligibility Standards
To be eligible for an SBA business loan, a smal business applicant must
 be located in the United States;
 be a for-profit operating business (except for loans to eligible passive companies
and businesses engaged in specified industries, such as insurance companies and
financial institutions primarily engaged in lending);8
 qualify as smal under the SBA’s size requirements;9
 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.10
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 wil not be the sole
reason for denial of a loan request); and
 affiliates’ effect on the applicant’s repayment ability.11

7 For additional information and analysis of recent small business relief acts see CRS Report R46284, COVID-19 Relief
Assistance to Sm all Businesses: Issues and Policy Options, by Robert Jay Dilger, Bruce R. Lindsay, and Sean Lowry.
8 A list of ineligible businesses is contained in 13 C.F.R. §120.110. In 2017, the SBA removed consumer and marketing
cooperatives from the list of ineligible businesses. See SBA, “Miscellaneous Amendments to Business Loan Programs
and Surety Bond Guarantee Program,” 82 Federal Register 39492, August 21, 2017.
9 For further analysis, see CRS Report R40860, Small Business Size Standards: A Historical Analysis of Contemporary
Issues, by Robert Jay Dilger.
10 13 C.F.R. §120.100; and 13 C.F.R. §120.101.
11 13 C.F.R. §120.150.
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Small Business Administration 7(a) Loan Guaranty Program

Borrower Program Requirements
Use of Proceeds
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 instal fixed assets;
 purchase inventory, supplies, and raw materials;
 finance working capital; and
 refinance certain outstanding debts.12
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 wil 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 nonsound business purpose.13
Loan Amounts
P.L. 111-240, the Smal Business Jobs Act of 2010, increased the 7(a) program’s maximum gross
loan amount for any one 7(a) loan from $2 mil ion to $5 mil ion (up to $3.75 mil ion maximum
guaranty). In FY2020, the average approved 7(a) loan amount was $533,075, and about 6% of al
7(a) loans exceeded $2 mil ion.14

12 13 C.F.R. §120.120.
13 13 C.F.R. §120.130.
14 SBA, “SBA Lending Statistics for Major Programs (as of 9/30/20 20).” 2,735 7(a) loans totaling at least $2 million
were approved in FY2020.
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Loan Terms, Interest Rate, and Collateral
Loan Terms
A 7(a) loan is required to have the shortest appropriate term, depending upon the borrower’s
ability to repay. The maximum term is 10 years, unless the loan finances or refinances real estate
or equipment with a useful life exceeding 10 years. In that case, the loan term can be up to 25
years, including extensions.15
Interest Rate
Lenders are al owed to charge borrowers “a reasonable fixed interest rate” or, with the SBA’s
approval, a variable interest rate.16 The SBA uses a multistep formula to determine the maximum
al owable fixed interest rate for al 7(a) loans (with the exception of the Export Working Capital
Program and Community Advantage loans) and periodical y publishes that rate and the maximum
al owable variable interest rate in the Federal Register.17
The maximum al owable fixed interest rates in June 2021 are 11.25% for 7(a) loans of $25,000 or
less; 10.25% for loans over $25,000 but not exceeding $50,000; 9.25% for loans over $50,000 up
to and including $250,000; and 8.25% for loans greater than $250,000.18
The 7(a) program’s maximum al owable variable interest rate is determined by a formula that
starts with the lender selecting a base rate from among the following: the lowest prime rate
(3.25% in June 2021), the 30-day LIBOR rate plus 300 basis points (3.09% in June 2021), or the
SBA optional peg rate (1.38% in the third quarter of FY2021).19 The optional peg rate is a
weighted average of rates the federal government pays for loans with maturities similar to the
average SBA loan.20
The lender may charge the borrower a variable rate that is pegged to the base rate and varies
depending on the loan’s amount and maturity.21 The maximum variable interest rate al owed
applies only to the initial rate on the date SBA received the loan application.

15 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.
16 13 C.F.R. §120.213.
17 For fixed interest rates, the SBA, effective November 6, 2018, uses the prime rate (see 13 C.F.R. §120.214(c)) in
effect on the first business day of the month as the base rate and increases the maximum allowable interest rate spread
as follows: for fixed rate loans of $25,000 or less, prime plus 600 basis points, p lus the 200 basis points permitted by 13
C.F.R. §120.215; for fixed rate loans over $25,000 but not exceeding $50,000, prime plus 600 basis points, plus the 100
basis points permitted by 13 C.F.R. §120.215; for fixed rate loans greater than $50,000 but not exceeding $250,000,
prime plus 600 basis points; and for fixed rate loans over $250,000, prime plus 500 basis points. SBA, “ Maximum
Allowable 7(a) Fixed Interest Rates,” 83 Federal Register 55478, November 6, 2018. For the previously used fixed
interest rates formula, see SBA, “ Business Loan Program Maximum Allowable Fixed Rate,” 74 Federal Register
50263-50264, September 30, 2009.
18 Colson Services Corp., “SBA Base Rates,” New York, at https://info.bnymellon.com/colson-sba-base-rates.html
(hereinafter Colson Services Corp., “ SBA Base Rates”).
19 Colson Services Corp., “SBA Base Rates.”
20 SBA, “7(a) Loan Program: T erms, Conditions, and Eligibility,” at https://www.sba.gov/partners/lenders/7a-loan-
program/terms-conditions-eligibility.
21 T he maximum variable interest rates allowed for 7(a) loans with a maturity less than seven years are the base rate
plus 4.25% for loans less than $25,000; the base rate plus 3.25% for loans of $25,000 -$50,000; and the base rate plus
2.25% for loans over $50,000. T he maximum variable interest rates allowed for 7(a) loans with a maturity of seven
years or longer are the base rate plus 4.75% for loans less than $25,000; the base rate plus 3.75% for loans of $25,000 -
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Small Business Administration 7(a) Loan Guaranty Program

Collateral
For 7(a) loans of $25,000 or less, the SBA does not require lenders to take collateral. For 7(a)
loans exceeding $25,000 to $350,000, the lender must follow the collateral policies and
procedures that it has established and implemented for its similarly sized non-SBA-guaranteed
commercial loans. However, the lender must, at a minimum, obtain a first lien on assets financed
with loan proceeds, and a lien on al of the applicant’s fixed assets, including real estate, up to the
point that the loan is fully secured. For 7(a) loans exceeding $350,000, the SBA requires lenders
to collateralize the loan to the maximum extent possible up to the loan amount.22 If business
assets do not fully secure the loan, the lender may place a lien against the principal’s personal real
estate (residential and investment) to the extent necessary to ensure that the loan is fully
secured.23
7(a) loans are considered “fully secured” if the lender has taken security interests in al available
fixed assets with a combined “net book value” up to the loan amount.24 The SBA directs lenders
to not decline a loan solely on the basis of inadequate collateral because “one of the primary
reasons lenders use the SBA-guaranteed program is for those Applicants that demonstrate
repayment ability but lack adequate collateral to repay the loan in full in the event of a default.”25
Lender Eligibility Standards and Program
Requirements
Lender Eligibility Standards
Lenders must have a continuing ability to evaluate, process, close, disburse, service, and liquidate
smal business loans; be open to the public for the making of such loans (and not be a financing
subsidiary, engaged primarily in financing the operations of an affiliate); have continuing good
character and reputation; and be supervised and examined by a state or federal regulatory
authority, satisfactory to the SBA. They must also maintain satisfactory performance, as
determined by the SBA through on-site review/examination assessments, historical performance
measures (such as default rate, purchase rate, and loss rate), and loan volume to the extent that it
affects performance measures.26 In FY2020, 1,673 lenders provided 7(a) loans.27

$50,000; and the base rate plus 2.75% for loans over $50,000. See 13 C.F.R. §120. 214 and 13 C.F.R. §120.215.
22 SBA, “SOP 50 10 6: Lender and Development Company Loan Programs,” (effective October 1, 2020), pp. 257, 258,
at https://www.sba.gov/document/sop-50-10-lender-development -company-loan-programs-0 (hereinafter SBA, “ SOP
50 10 6”).
23 SBA, “SOP 50 10 6,” p. 259.
24 SBA, “SOP 50 10 6,” p. 257. “Net book value” is defined as an asset’s original price minus depreciation and
amortization. New machinery and equipment may be valued at no more than 75% of price minus any prior liens for the
calculation of “fully secured.” Used or existing machinery and equipment (excluding furniture and fixtures) may be
valued at no more than 50% of Net Book Value or 80% with an Orderly Liquidation Appraisal minus any prior liens
for the calculation of “fully-secured.” Improved real estate can be valued at 85% and unimproved real estate can be
valued at 50% of the market value for the calculation of “fully-secured.” Furniture and fixtures may be valued at no
more than 10% of Net Book Value or appraised value.
25 SBA, “SOP 50 10 6,” p. 256, 257.
26 13 C.F.R. §120.410.
27 SBA, FY2022 Congressional Justification and FY2020 Annual Performance Report, p. 39, at https://www.sba.gov/
document/report -congressional-budget-justification-annual-performance-report (hereinafter SBA, FY2022
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PLP Lenders
The SBA started the Preferred Lenders Program (PLP) on March 1, 1983, initial y on a pilot
basis.28 It is designed to streamline the procedures necessary to provide financial assistance to
smal businesses by delegating the final credit decision and most servicing and liquidation
authority and responsibility to carefully selected PLP lenders.29 PLP loan approvals are subject
only to a brief eligibility review and the assignment of a loan number by SBA.30 PLP lenders draft
the SBA Authorization (of loan guaranty approval) without the SBA’s review, and execute it on
behalf of the SBA. In FY2020, PLP lenders approved 19,604 7(a) loans (46.3% of al 7(a) loans),
amounting to $17.0 bil ion (75.3% of the total amount approved).31
PLP lenders must comply with al of the SBA’s business loan eligibility requirements, credit
policies, and procedures. The PLP lender is required to stay informed on, and apply, al of the
SBA’s loan program requirements. They must also complete and retain in the lender’s file al
forms and documents required of standard 7(a) loan packages.32 The SBA uses an automated
system to assess PLP lender performance quarterly using a composite risk rating system. PLP
lenders with an outstanding SBA balance of $10 mil ion or more may also be subject to more in-
depth reviews.33
Lender Program Requirements
The Application Process
Borrowers submit applications for a 7(a) business loan to private lenders. The lender reviews the
application and decides if it merits a loan on its own or if it has some weaknesses which, in the
lender’s opinion, do not meet standard, conventional underwriting guidelines and require
additional support in the form of an SBA guaranty. The SBA guaranty assures the lender that if
the borrower does not repay the loan and the lender has adhered to al applicable regulations

Congressional Justification and FY2020 Annual Perform ance Report). T here were 2,476 active 7(a) lenders in
FY2012, 2,345 in FY2013, 2,244 in FY2014, 2,163 in FY2015, 2,045 in FY2016, 1,978 in FY2017, 1,810 in FY2018,
and 1,708 in FY2019.
28 GAO, 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.
T he SBA established a Certified Lenders Program on February 26, 1979, but removed CLP authority from the Code of
Federal Regulations (13 C.F.R. §120.440-120.441) effective January 1, 2018. T he CLP program was designed to
provide expeditious service on 7(a) loan applications received from lenders who have a successful SBA lending track
record and a thorough understanding of SBA policies and procedures. In recent years, CLP lenders approved less than
1.0% of the number of 7(a) loans approved each year and less than 2.0% of the amount of 7(a) loans approved each
year. For further information concerning the CLP program see U.S. Congress, Senate Select Committee on Small
Business, SBA Loan Oversight, hearing on SBA loan oversight, 96th Cong., 1st sess., September 18, 1997 (Washington:
GPO, 1997), p. 31; GAO, SBA’s Pilot Program s to Im prove Guaranty Lo an Procedures Need Further Developm ent,
CED-81-25, February 2, 1981, p. 7, at http://www.gao.gov/assets/140/131789.pdf; and GAO, 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.
29 GAO, 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.
30 SBA, “SOP 50 10 6,” p. 32.
31 PLP lenders approved 16,528 7(a) loans totaling $15.1 billion in FY2015, 17,234 7(a) loans totaling $15.6 billion in
FY2016, 25,028 7(a) loans totaling $18.2 billion in FY2017, 26,484 loans totaling $18.8 billion in FY2018, and 23,888
loans totaling $17.6 billion in FY2019. See SBA, “ SBA Lending Statistics for Major Programs (as of 9/30/20 20).”
32 SBA, “SOP 50 10 6,” p. 39.
33 SBA, “SOP 50 10 6,” p. 31.
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concerning the loan, the SBA wil reimburse the lender for its loss, up to the percentage of the
SBA’s guaranty. The smal business borrowing the money remains obligated for the full amount
due.
If the lender determines that it is wil ing to provide the loan, but only with an SBA guaranty, it
submits the application for approval to the SBA’s Loan Guaranty Processing Center (LGPC)
through the SBA’s E-Tran (Electronic Loan Processing/Servicing) website (which is available
through SBA One, the SBA’s automated lending platform) or, if attachments to the application
are too large for E-Tran, by secured electronic file transfer.
The LGPC has two physical locations: Citrus Heights, CA, and Hazard, KY.34 This center
processes 7(a) loan guaranty applications for lenders who do not have delegated authority to
make 7(a) loans without the SBA’s final approval.
PLP and express lenders are authorized to make credit decisions without SBA review prior to loan
approval. However, the PLP and express lender’s analysis is subject to the SBA’s review and
determination of adequacy when the lender requests the SBA to purchase its guaranty and when
the SBA is conducting a review of the lender.35
As an additional safeguard against the potential for loan defaults, the SBA now requires all non-
express 7(a) loans of $350,000 or less to be SBA credit scored through E-Tran prior to
submission/approval.36
 If the credit score is below the minimum set by the SBA (currently a Smal
Business Scoring Service score of 155 for 7(a) loans of $350,000 or less), the
loan must be submitted to the SBA for approval with a full credit write-up for
consideration. The loan cannot be processed under delegated authority.37
 If the credit score is acceptable to the SBA, the lender is a PLP lender, and the
loan is eligible to be processed under the PLP lender’s delegated authority, the
lender wil receive an SBA loan number indicating that the loan is approved.38
The PLP lender’s documentation, including underwriting, closing, and servicing,
must be maintained in their files, and can be reviewed by the SBA at any time.
 If the lender is not a PLP lender or if the loan is not eligible to be submitted
under the PLP lender’s delegated authority, the lender must refer the loan to the
LGPC for review.

34 SBA, “ 7a Loan Guaranty Processing Center (Citrus Heights, CA & Hazard, KY),” at https://www.sba.gov/
CitrusHeightsLGPC.
35 SBA, “SOP 50 10 6,” p. 247.
36 T he 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/sites/default/files/files/5000-1240_0.pdf. T he 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 . T he SBA calculates the credit
score based on a combination of consumer credit bureau data, business bureau data, borrower financials, and
application data. T he 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.
37 SBA, “SOP 50 10 6,” p. 252.
38 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 .
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The application materials required for a SBA guaranty vary depending on the size of the loan
($350,000 or less versus exceeding $350,000) and the method of processing used by the lender
(standard versus expedited/express).
The following SBA documentation is required for al 7(a) standard loans of $350,000 or less:
 Form 1919: Borrower Information Form. SBA form 1919 provides information
about the borrower (name, name of business, social security number, date and
place of birth, gender, race, veteran, etc.); the loan request; any indebtedness; the
principals and affiliates; current or previous government financing; the
applicant’s eligibility (e.g., criminal information, citizenship status); the loan’s
eligibility for delegated or expedited processing (e.g., the borrower is not more
than 60 days delinquent in child support payments, not proposed or presently
excluded from participation in this transaction by any federal department or
agency, has no potential for a conflict of interest due to an owner being a c urrent
or former SBA employee, a Member of Congress, or a SCORE volunteer); and,
among other disclosures, the firm’s existing number of employees, the number of
jobs to be created as a result of the loan, and the number of jobs that wil be
retained as a result of the loan that would have otherwise been lost.39
 Form 912: Statement of Personal History. SBA form 912 is required if the
borrower reports on Form 1919 an arrest in the past six months for a criminal
offense or had ever been convicted, plead guilty, plead nolo contendere, been
placed on pretrial diversion, or been placed on any form of parole or probation
(including probation before judgment) of any criminal offense.40 Form 912
requires the borrower to furnish details concerning his or her offense(s) and
authorizes the SBA’s Office of Inspector General to request criminal record
information about the applicant from criminal justice agencies for determining
program eligibility. It must be dated within 90 days of the application’s
submission to the SBA.
 Form 159: Fee Disclosure and Compensation Agreement. SBA form 159 is
required if the borrower reports on Form 1919 that he or she used (or intends to
use) a packager, broker, accountant, lawyer, etc. to assist in preparing the loan
application or any related materials.41 SBA form 159 is also required if the lender
retains the services of a packager, broker, accountant, lawyer, etc. to assist in
preparing the loan application or any related materials. Form 159 provides
identifying information about the packager, broker, accountant, lawyer, etc. and
the fees paid to any such person.
 Form 601: Agreement of Compliance (prohibiting discrimination). SBA form 601
is required if the borrower reports on Form 1919 that more than $10,000 of the

39 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.
40 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. T he lender is required to process a background check and character
determination if the borrower has been arrested in t he past six months for any criminal offense or if the borrower has
ever been convicted, plead guilty, plead nolo contendere, been placed on pretrial diversion, or been placed on any form
of parole or probation (including probation before judgment) of any criminal offense.
41 SBA, “SBA Form 159: Fee Disclosure and Compensation Agreement ,” at https://www.sba.gov/sites/default/files/
forms/SBA_159_7a.pdf.
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loan proceeds wil be used for construction.42 Form 601 certifies that the
borrower wil cooperate actively in obtaining compliance with Executive Order
11246, which prohibits discrimination on the basis of race, color, religion, sex, or
national origin and requires affirmative action to ensure equality of opportunity
in al aspects of employment related to federal y assisted construction projects in
excess of $10,000.
 Form 1920: Lenders Application for Guaranty for all 7(a) Programs.43 SBA
form 1920 provides identifying information about the lender; the loan type
(standard, SBAExpress, Export Express, etc.); loan terms; use of proceeds; the
business’s size and information about affiliates, if any; the applicant’s character;
if credit is reasonably available elsewhere; the type of business; potential
conflicts of interest; and other information such the number of jobs created or
retained. PLP lenders complete the form and retain it in the loan file. Other
lenders must submit this form electronical y to the LGPC.
 Verification of Alien Status. Documentation of the U.S. Citizenship and
Immigration Services (USCIS) status of each alien is required prior to
submission of the application to the SBA.
 Lender’s Credit Memorandum. For loans up to and including $350,000, the
Lender’s Credit Memorandum includes a brief description of the history of the
business and its management; the debt service coverage ratio (net operating
income compared to total debt service must be at least 1:1); statement that the
lender has reconciled financial data (including sel er’s financial data) against IRS
transcripts; an owner/guarantor analysis (including personal financial condition);
lender’s discussion of life insurance requirements; explanation and justification
for any refinancing; analysis of credit, including lender’s rationale for
recommending approval; for a change of ownership, discussion/analysis of
business valuation and how the change benefits the business; discussion of any
liens, judgments, or bankruptcy filings; and discussion of any other relevant
information. For loans exceeding $350,000, the Lender’s Credit Memorandum
must also include an analysis of collateral and a financial analysis which includes
an analysis of the historical financial statements; defining assumptions
supporting projected cash flow; and, when used, spread of pro forma balance
sheet, ratio calculations, and working capital analysis.44
 Cash Flow Projections. A projection of the borrower’s cash flow, month-by-
month for one year, is required for al new businesses, and when otherwise
applicable.
The following forms and documentation are also required for 7(a) standard loans exceeding
$350,000:
 Form 413: Personal Financial Statement. SBA form 413 provides detailed
information concerning the applicant’s assets and liabilities and must be dated

42 SBA, “SBA Form 601: Agreement of Compliance,” at https://www.sba.gov/sites/default/files/forms/
SBA%20601.pdf.
43 SBA, “ SBA Form 1920: Lender’s Application for Guaranty for all 7(a) Programs,” at https://www.sba.gov/sites/
default/files/articles/SBA_1920_0.pdf.
44 SBA, “Standard 7(a) LGPC 10-T ab Submission Instructions,” at https://www.sba.gov/sites/default/files/files/
LGPC%2010-T ab%20T emplate_20140313.pdf.
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within 90 days of submission to the SBA, on al owners of 20% or more
(including the assets of the owner’s spouse and any minor children), and
proposed guarantors. Lenders may substitute their own Personal Financial
Statement form.
 Form 1846: Statement Regarding Lobbying. SBA Form 1846 must be signed and
dated by lender.45 It indicates that if any funds have been paid or wil be paid to
any person for influencing or attempting to influence an officer or employee of
any agency, a Member of Congress, an officer or employee of Congress, or an
officer or employee of a Member of Congress in connection with this
commitment, the lender wil complete and submit a Standard Form LLL
“Disclosure of Lobbying Activities.”46
 A copy of Internal Revenue Service (IRS) Form 4506-T, Request for Copy of Tax
Return. Lenders must identify the date IRS Form 4506-T was sent to the IRS. For
nondelegated lenders, verification of IRS Form 4506-T is required prior to
submission of the application to the SBA. For PLP and express lenders,
verification of IRS Form 4506-T is required prior the first disbursement.
 Business Financial Statements or tax returns dated within 180 days of the
application’s submission to the SBA, consisting of (1) year-end balance sheets
for the last three years, (2) year-end profit and loss statements for the last three
years, (3) reconciliation of net worth, (4) interim balance sheet, and (5) interim
profit and loss statements.
 Affiliate and Subsidiary Financial Statements or tax returns dated within 180
days of the application’s submission to the SBA, consisting of (1) year-end
balance sheets for the last three years, (2) year-end profit and loss statements for
the last three years, (3) reconciliation of net worth, (4) interim balance sheet, and
(5) interim profit and loss statements.
 A copy of the Lease Agreement, if applicable.
 A detailed Schedule of Collateral.47
 A detailed List of M&E (machinery and equipment) being purchased with SBA
loan proceeds, including cost quotes.
 If real estate is to be purchased with the loan proceeds, a Real Estate Appraisal,
Environmental Investigation Report questionnaire, a cost breakdown, and copy of
any Real Estate Purchase Agreements.
 If purchasing an existing business with loan proceeds, a (1) copy of buy-sel
agreement, (2) copy of business valuation, (3) pro forma balance sheet for the
business being purchased as of the date of transfer, (4) copy of the sel er’s
financial statements for the last three complete fiscal years or for the number of
years in business if less than three years, (5) interim statements no older than 180
days from date of submission to the SBA, and (6) if the sel er’s financial

45 SBA, “SBA Form 1846: Statement Regarding Lobbying,” at https://www.sba.gov/sites/default/files/forms/
bank_sba1846.pdf.
46 U.S. Office of Management and Budget, “ Standard Form LLL: Disclosure of Lobbying Activities,” at
https://www.gsa.gov/Forms/T rackForm/33144.
47 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.
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statements are not available, the sel er must provide an alternate source of
verifying revenues.
 An explanation of the type and source of applicant’s equity injection. Proper
evidence of a borrower’s equity injection may include the copy of a check or
wire transfer together with proof that the check or wire transfer was processed, or
a copy of an escrow settlement sheet with a bank account statement showing the
injection into the business prior to disbursement. A promissory note, “gift letter,”
or financial statement is general y not sufficient evidence.48
SBA Guaranty and Servicing Fees
To offset its costs, the SBA is authorized to charge lenders an up-front, one-time guaranty fee and
an annual, ongoing service fee for each 7(a) loan approved and disbursed.49 The guaranty fee is a
percentage of the SBA guaranteed portion of the loan. As mentioned, these fees are being waived
in FY2021.50
When imposed, the SBA’s fees vary depending on loan amount and maturity (see Table 1). The
maximum guaranty fee for 7(a) loans with maturities exceeding 12 months is set by statute and
varies depending on the loan amount.51 On short-term loans (maturities of less than 12 months),
the lender must pay the guaranty fee to the SBA electronical y through www.pay.gov within 10
days from the date the SBA loan number is assigned. If the fee is not received within the specified
time frame, the SBA wil cancel the guaranty. On loans with maturities in excess of 12 months,
the lender must pay the guaranty fee to the SBA within 90 days of the date of loan approval.
Otherwise, the guarantee wil be cancel ed.52
For short-term loans (maturities of 12 months or less), the lender may charge the guaranty fee to
the borrower only after the lender has paid the guaranty fee. For loans with maturities in excess of
12 months, the lender may charge the guaranty fee to the borrower after initial disbursement.53
Lenders are permitted to retain 25% of the guaranty fee on loans with a gross amount of $150,000
or less.54
When imposed, the annual service fee cannot exceed 0.55% of the outstanding balance of the
SBA’s share of the loan and is required to be no more than the “rate necessary to reduce to zero

48 SBA, “SOP 50 10 6,” p. 234. T he SBA requires borrowers to provide an equity injection under specified
circumstances. For example, start -up businesses (those in operation for up to one year) are required to provide at least
10% of total project costs to indicate that the business can operate on a sound financial basis.
49 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.
50 P.L. 116-260, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Division N, T itle III of
the Consolidated Appropriations Act, 2021).
51 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 T echnical Amendments,” 76 Federal Register 63544-63545, October 13, 2011.
52 SBA, “SOP 50 10 6,” pp. 160, 161.
53 SBA, “SOP 50 10 6,” p. 161.
54 SBA, “SOP 50 10 6,” p. 160.
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Small Business Administration 7(a) Loan Guaranty Program

the cost to the Administration” of making guaranties.55 The lender’s annual service fee to the SBA
cannot be charged to the borrower.56
This is not the first time that SBA fees have been waived. For example, in an effort to assist
veteran-owned smal businesses, the SBA waived its up-front, one-time guaranty fee for al
veteran loans under the 7(a) SBAExpress program (up to $350,000) from January 1, 2014,
through the end of FY2015. 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
(which occurred in FY2020). The CARES Act permanently eliminated the zero subsidy
requirement.57
Table 1. SBA Annual Service and Guaranty Fees, FY2021
Maturity and Gross Loan
Amount
Annual Service Fee
Guaranty Fee
12 months or less
0% (0.55% in FY2020)
0% (0.25% in FY2020)
Exceeding 12 months and
0% (0.55% in FY2020)
0% (2% in FY2020)
$150,000 or less
Exceeding 12 months and
0% (0.55% in FY2020)
0% (3% in FY2020)
$150,001 to $700,000
Exceeding 12 months and
0% (0.55% in FY2020)
0%
$700,001 to $5,000,000
(3.5% of the guaranteed portion up
to $1 mil ion plus
3.75% of the guaranteed portion
over $1 mil ion in FY2020)
Source: U.S. Smal Business Administration, “SBA Information Notice: 7(a) Fees Effective October 1, 2020,” at
https://www.sba.gov/document/information-notice-5000-20048-sba-information-notice; and P.L. 116-260, the
Economic Aid to Hard-Hit Smal Businesses, Nonprofits, and Venues Act (Division N, Title III of the
Consolidated Appropriations Act, 2021).
Notes: If two or more SBA guaranteed loans are approved within 90 days of each other, the guaranty fee is
determined based on the aggregate amount of the loans. Lenders are not permitted to split loans for the
purpose of avoiding fees.

55 15 U.S.C. §636(a)(23)(a).
56 15 U.S.C. §636(a)(23)(b).
57 T he SBA also waived 50% of the up-front, one-time guaranty fee on all non-SBAExpress 7(a) loans of $150,001 to
$5 million for veterans in FY2015 and FY2016; 50% of the up -front, one-time guaranty fee on all non-SBAExpress
7(a) loans of $150,001 to $500,000 for veterans in FY2017; and 50% of the up -front, one-time guaranty fee on all non-
SBAExpress 7(a) loans of $125,001 to $350,000 for veterans in FY2018.
In addition, the SBA waived its annual service fee for all 7(a) loans of $150,000 or less approved from FY2014 through
FY2016 (the annual service fee for other small businesses was 0.52% in FY2014, 0.519% in FY2015, and 0.473% in
FY2016); waived the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural
area or a HUBZone in FY2019 (the annual service fee for other small businesses was 0.55% in FY2019); waived the
up-front, one-time guaranty fee for all 7(a) loans of $150,000 or less approved from FY2014 through FY2017; waived
the up-front, one-time guaranty fee for all 7(a) loans of $125,000 or less approved in FY2018; and reduced the up -front,
one-time guaranty fee for loans made to small businesses located in a rural area or a HUBZone from 2% to 0.6667% of
the guaranteed portion of the loan in FY2019 .
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Lender Packaging, Servicing, and Other Fees
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.58
The lender may also charge an applicant an additional fee if, subject to prior written SBA
approval, al or part of a loan wil 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.59 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.60
The lender is also al owed 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.61
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 one year
during the first three 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.62
Program Statistics
Loan Volume
As shown in Table 2, the total number and amount of SBA 7(a) loans approved (before and after
cancel ations and modifications) declined in FY2008 and FY2009, primarily due to reduced
demand for smal business loans during the Great Recession (2007-2009). Since then, the total
number and amount of 7(a) loans approved has varied somewhat, general y increasing during
good economic times and declining when economic conditions weakened.
The number and amount of 7(a) loans approved annual y is higher than the number and amount of
loans disbursed because some borrowers did not accept the loan for several reasons, such as

58 13 C.F.R. §120.221. Effective October 1, 2020, lender fees will be limited to $3,000 for a loan up to $350,000 and no
more than $5,000 for a loan over $350,000. The lender may continue to charge an applicant an additional fee if, subject
to prior written SBA approval, all or part of a loan will have extraordinary servicing needs. See SBA, “ Express Loan
Programs; Affiliation Standards,” 85 Federal Register 7626, February 10, 2020.
59 13 C.F.R. §120.221.
60 13 C.F.R. §120.222. A commitment fee may be charged for a loan made under the Export Working Capital Loan
Program.
61 13 C.F.R. §120.221.
62 13 C.F.R. §120.223.
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financing was secured elsewhere, funds were no longer needed, or a change in business
ownership.
Table 2 also provides the 7(a) program’s unpaid principal balance by fiscal year. Precise
measurements of the smal business credit market are not available. However, the SBA has
estimated that the smal business credit market (outstanding bank loans of $1 mil ion or less, plus
credit extended by finance companies and other sources) is roughly $1.2 tril ion.63 The 7(a)
program’s unpaid principal balance of $95.64 bil ion as of March 31, 2020, was about 8.0% of
that amount.
Table 2. 7(a) Loan Guaranty Program, Loan Volume, FY2007-FY2020
Amount
Approved After
Total Unpaid
Number of
Number of Loans
Amount
Cancellations and
Principal
Loans
Approved After
Approved
Modifications
Balance
FY
Approved
Cancellations
($ in billions)
($ in billions)
($ in billions)
2007
99,607
88,267
$14.29
$12.57
$46.08
2008
69,437
61,633
$12.67
$11.07
$47.69
2009
41,274
36,624
$9.18
$8.08
$48.56
2010
46,921
39,850
$12.32
$10.01
$50.85
2011
53,692
45,616
$19.62
$16.14
$56.44
2012
44,357
38,894
$15.13
$13.35
$60.08
2013
46,386
40,479
$17.86
$15.58
$63.67
2014
52,044
46,110
$19.19
$17.00
$68.19
2015
63,461
55,733
$23.58
$20.50
$73.02
2016
64,074
57,993
$24.13
$21.78
$78.79
2017
62,430
57,160
$25.45
$23.28
$86.19
2018
60,354
55,474
$25.37
$23.07
$92.42
2019
51,907
47,724
$23.18
$21.27
$95.10
2020
42,302
NA
$22.55
NA
$95.64
(as of 3/31/2020)
Sources: U.S. Smal Business Administration, correspondence with the author, December 18, 2018 and
October 18, 2019; U.S. Smal Business Administration, “SBA Lending Statistics for Major Programs (as of
9/30/2020),” at https://www.sba.gov/sites/default/files/2020-10/WebsiteReport_asof_20200930-508.pdf; and U.S.
Smal Business Administration, “Smal Business Administration Loan Program Performance: Table 1─Unpaid
Principal Balance By Program,” at https://www.sba.gov/document/report-smal -business-administration-loan-
program-performance.
Notes: The 7(a) program’s authorization limit on disbursements was $17.5 bil ion in FY2007 -FY2013 (P.L. 109-
289, P.L. 110-161, P.L. 111-8, P.L. 111-117, P.L. 112-10, P.L. 112-74, and P.L. 112-175); initial y $17.5 bil ion and
later increased to $18.5 bil ion in FY2014 (P.L. 113-164); initial y $18.75 bil ion (P.L. 113-235) and later increased
to $23.5 bil ion in FY2015 (P.L. 114-38); $26.5 bil ion in FY2016 (P.L. 114-113), $27.5 bil ion in FY2017 (P.L. 115-
31), $29.0 bil ion in FY2018 (P.L. 115-141), $30 bil ion in FY2019 and FY2020 (P.L. 116-6, P.L. 116-93, and P.L.
116-147); and $105 bil ion in FY2021 (P.L. 116-260; $30 bil ion in the Consolidated Appropriations Act, 2021 and
$75 bil ion in the Economic Aid to Hard-Hit Smal Businesses, Nonprofits, and Venues Act (Division N, Title III
of the Consolidated Appropriations Act, 2021)).

63 SBA, Office of Advocacy, “Frequently Asked Questions About Small Business Finance,” July 2016, at
https://www.sba.gov/sites/default/files/Finance-FAQ-2016_WEB.pdf.
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Appropriations for Loan Subsidy Costs
One of the SBA’s goals is to achieve a zero subsidy rate for its loan guaranty programs. A zero
subsidy rate occurs when the SBA’s loan guaranty programs generate sufficient revenue through
fee collections and recoveries of collateral on purchased (defaulted) loans to not require
appropriations to issue new loan guarantees.
As indicated in Table 3, the SBA needed additional appropriations to achieve a zero subsidy rate
for the 7(a) program in FY2010, FY2011-FY2013, FY2020, and FY2021. The 504/CDC loan
guaranty program received additional appropriations to achieve a zero subsidy rate in FY2012-
FY2015.
Table 3. Business Loan Credit Subsidies, 7(a) and 504/CDC Loan Guaranty
Programs, FY2007-FY2022
($ in mil ions)
FY
7(a)
504/CDC
Total Subsidy
2007
$0.0
$0.0
$0.0
2008
$0.0
$0.0
$0.0
2009
$0.0
$0.0
$0.0
2010
$80.0
$0.0
$80.0
2011
$80.0
$0.0
$80.0
2012
$139.4
$67.7
$207.1
2013
$213.8
$102.5
$316.3
2014
$0.0
$107.0
$107.0
2015
$0.0
$45.0
$45.0
2016
$0.0
$0.0
$0.0
2017
$0.0
$0.0
$0.0
2018
$0.0
$0.0
$0.0
2019
$0.0
$0.0
$0.0
2020
$99.0
$0.0
$99.0
2021
$15.0
$0.0
$15.0
2022 request
$0.0
$0.0
$0.0
Sources: U.S. Smal Business Administration, FY2011 Congressional Budget Justification and FY2009 Annual
Performance Report, p. 19; U.S. Smal Business Administration, FY2012 Congressional Budget Justification and
FY2010 Annual Performance Report, p. 22; U.S. Small Business Administration, FY2013 Congressional Budget
Justification and FY2011 Annual Performance Report, p. 19; U.S. Smal Business Administration, FY2014
Congressional Budget Justification and FY2012 Annual Performance Report, p. 25; U.S. Smal Business
Administration, FY2015 Congressional Budget Justification and FY2013 Annual Performance Report, p. 24; P.L.
113-235, the Consolidation and Further Continuing Appropriations Act, 2015; U.S. Smal Business
Administration, FY2016 Congressional Budget Justification and FY2014 Annual Performance Report, p. 16; U.S.
Smal Business Administration, FY2017 Congressional Budget Justification and FY2015 Annual Performance
Report, p. 14; P.L. 115-141, the Consolidated Appropriations Act, 2018; P.L. 116-6, the Consolidated
Appropriations Act, 2019; P.L. 116-93, the Consolidated Appropriations Act, 2020; P.L. 116-260, the
Consolidated Appropriations Act, 2021; and U.S. Smal Business Administration, FY2022 Congressional Budget
Justification and FY2020 Annual Performance Report, p. 8.
Notes: The Microloan program also receives an appropriation for credit subsidy, primarily for providing below
market interest rates to Microloan intermediaries. The subsidies were $1.3 mil ion in FY2007, $2.0 mil ion in
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FY2008, $2.5 mil ion in FY2009, $3.0 mil ion in FY2010 and FY2011, $3.678 mil ion in FY2012, $3.498 mil ion
(after sequestration) in FY2013, $4.6 mil ion in FY2014, $2.5 mil ion in FY2015, $3.338 mil ion in FY2016, $4.338
mil ion in FY2017, $3.438 mil ion in FY2018, $4.0 mil ion in FY2019, $5 mil ion in FY2020, and $12 mil ion in
FY2021. The Biden Administration has requested $6 mil ion for Microloan credit subsidies in FY2022.
In addition, as mentioned, P.L. 116-136, the CARES Act, appropriated $17 bil ion, and P.L. 116-
260, the Economic Aid to Hard-Hit Smal Businesses, Nonprofits, and Venues Act, appropriated
$3.5 bil ion to resume monthly debt relief payments to 7(a), 504/CDC, and Microloan borrowers,
capped at $9,000 per month per borrower.64 Payments are dependent on the availability of funds,
when the loan was disbursed, the type of loan received, and the business’s industry.
P.L. 116-260 also appropriated $1.918 bil ion for 7(a) and 504/CDC loan credit subsidies related
to temporarily increasing the 7(a) loan guarantee to 90%, temporarily increasing the SBAExpress
program’s maximum loan amount to $1 mil ion, temporarily increasing the SBAExpress
program’s loan guarantee from 50% to 75% for loans of $350,000 and less, and waiving 7(a) and
504/CDC fees.
Administrative Expenses
In FY2020, the SBA spent $71.7 mil ion on the 7(a) program for administrative expenses and
debt relief, including $32.5 mil ion for loan making, $3.7 mil ion for loan servicing, $23.3 mil ion
for loan liquidation, and $12.3 mil ion for debt relief. Also, the SBA spent $32.6 mil ion on lender
oversight, including oversight of 7(a) lenders. The SBA anticipates that 7(a) program
administrative expenses and debt relief wil be about $83.3 mil ion in FY2021 and $91.3 mil ion
in FY2022. In addition, the SBA anticipates that it will spend about $31.3 mil ion in FY2021 and
$34.7 mil ion in FY2022 for lender oversight of the SBA’s various lending programs.65
Use of Proceeds and Borrower Satisfaction
In FY2017, borrowers used 7(a) loan proceeds to
 purchase land or make land improvements (26.62%);
 purchase a business (17.06%);
 finance working capital (15.59%);
 pay off loans, accounts payable or notes payable (13.23%);
 construct new buildings (6.06%);
 purchase equipment (5.76%);
 make leasehold improvements (3.25%);
 expand or renovate current buildings (2.39%);
 refinance existing debt (1.40%); and
 cover other expenses (8.64%).66
In 2008, the Urban Institute released the results of an SBA-commissioned study of the SBA’s
loan guaranty programs. As part of its analysis, the Urban Institute surveyed a random sample of

64 SBA, “SBA Extends Crucial Lifeline to Borrowers Impacted by COVID-19 with Debt Relief,” January 10, 2021, at
https://www.sba.gov/article/2021/jan/10/sba-extends-crucial-lifeline-borrowers-impacted-covid-19-debt-relief.
65 SBA, FY2022 Congressional Justification and FY2020 Annual Performance Report, p. 19.
66 SBA, Office of Congressional and Legislative Affairs, correspondence with the author, January 10, 2018.
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SBA loan guaranty borrowers. The survey indicated that most of the 7(a) borrowers responding to
the survey rated their overal satisfaction with their 7(a) loan and loan terms as either excel ent
(18%) or good (50%). One out of every five 7(a) borrowers (20%) rated their overal satisfaction
with their 7(a) loan and loan terms as fair, and 6% rated their overal satisfaction with their 7(a)
loan and loan terms as poor (7% reported don’t know or did not respond).67 In addition, 90% of
the survey’s respondents reported that the 7(a) loan was either very important (62%) or somewhat
important (28%) to their business success (2% reported somewhat unimportant, 3% reported very
unimportant, and 4% reported don’t know or did not respond).68
Borrower Demographics
The Urban Institute found that about 9.9% of conventional smal business loans are issued to
minority-owned smal businesses, and about 16% of conventional smal business loans are issued
to women-owned businesses.69 In FY2020, 27.6% of 7(a) loan approvals ($6.22 bil ion of $22.55
bil ion) were to minority-owned businesses (18.5% Asian, 5.4% Hispanic, 2.3% African-
American, multi-minority group 0.8%, and 0.5% American Indian) and 12.0% ($2.93 bil ion of
$22.55 bil ion) were to women-owned businesses.70 From its comparative analysis of
conventional smal business loans and the SBA’s loan guaranty programs, the Urban Institute
concluded the following:
SBA’s loan programs are designed to enable private lenders to make loans to creditworthy
borrowers who would otherwise not be able to qualify for a loan. As a result, there should
be differences in the types of borrowers and loan terms associated with SBA -guaranteed
and conventional small business loans.
Our comparative analysis shows such differences. Overall, loans under the 7(a) and 504
programs were more likely to be made to minority-owned, women-owned, and start-up
businesses (firms that have historically faced capital gaps) as compared to conventional
small business loans. Moreover, the average amounts for loans made under the 7(a) and
504 programs to these types of firms were substantially greater than conventional smal
business loans to such firms. These findings suggest that the 7(a) and 504 programs are
being used by lenders in a manner that is consistent with SBA’s objective of making credit
available to firms that face a capital opportunity gap.71

67 Christopher Hayes, An Assessment of Small Business Administration Loan and Investment Performance: Survey of
Assisted Businesses (Washington, DC: T he Urban Institute, 2008), p. 5, at http://www.urban.org/UploadedPDF/
411599_assisted_business_survey.pdf (hereinafter Christopher Hayes, An Assessm ent of Sm all Business Adm inistration
Loan and Investm ent Perform ance: Survey of Assisted Businesses).
68 Christopher Hayes, An Assessment of Small Business Administration Loan and Investment Performance: Survey of
Assisted Businesses, p. 5.
69 Kenneth T emkin, Brett T heodos, with Kerstin Gentsch, Competitive and Special Competitive Opportunity Gap
Analysis of the 7(A) and 504 Program s (Washington, DC: T he Urban Institute, 2008), p. 13, at http://www.urban.org/
UploadedPDF/411596_504_gap_analysis.pdf.
70 SBA, “SBA Lending Statistics for Major Programs (as of 9/30/20 20).
71 Kenneth T emkin, Brett T heodos, with Kerstin Gentsch, Competitive and Special Competitive Opportunity Gap
Analysis of the 7(A) and 504 Program s (Washington, DC: T he Urban Institute, 2008), p. 21, at http://www.urban.org/
UploadedPDF/411596_504_gap_analysis.pdf.
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Congressional Issues
Access to Capital
Congress has always shown a great interest in the 7(a) loan program because of concerns that
smal businesses might be prevented from accessing sufficient capital to enable them to grow and
create jobs. That interest has grown especial y acute in the wake of the COVID-19 pandemic’s
adverse impact on the national economy.
During the 110th and 111th Congresses, several laws were enacted to increase the supply and
demand for capital for both large and smal businesses.72 For example, in 2008, Congress adopted
P.L. 110-343, the Emergency Economic Stabilization Act of 2008, which authorized the Troubled
Asset Relief Program (TARP). Under TARP, the U.S. Department of the Treasury was authorized
to purchase or insure up to $700 bil ion in troubled assets, including smal business loans, from
banks and other financial institutions. The law’s intent was “to restore liquidity and stability to
the financial system of the United States.”73 P.L. 111-203, the Dodd-Frank Wal Street Reform
and Consumer Protection Act, reduced total TARP purchase authority from $700 bil ion to $475
bil ion. The Department of the Treasury’s authority to make new financial commitments under
TARP ended on October 3, 2010. The Department of the Treasury has disbursed approximately
$430 bil ion in TARP funds, including $370 mil ion to purchase SBA 7(a) loan guaranty program
securities.74
In addition, in 2009, P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA)
provided an additional $730 mil ion for SBA programs, including $375 mil ion to temporarily
reduce fees in the SBA’s 7(a) and 504/CDC loan guaranty programs 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 al standard 7(a) loans. Congress subsequently
provided another $265 mil ion, and authorized the SBA to reprogram another $40 mil ion, to
extend the fee reductions and loan modification through May 31, 2010, and the Smal Business
Jobs Act of 2010 provided another $505 mil ion (plus $5 mil ion for administrative expenses) to
extend the fee reductions and loan modification from September 27, 2010, through December 31,
2010.75 Also, P.L. 111-322, the Continuing Appropriations and Surface Transportation Extensions

72 For further analysis, see CRS Report R40985, Small Business: Access to Capital and Job Creation, by Robert Jay
Dilger.
73 P.L. 110-343, the Emergency Economic Stabilization Act of 2008.
74 U.S. Department of the T reasury, 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%20Repo rt%20to%20Congress.pdf. On March 16, 2009, President Obama announced
that the Department of the T reasury would use T ARP 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.” T he plan
was deferred after it met resistance from lenders. Some lenders objected to T ARP’s requirement that participating
lenders comply with executive compensation limits and issue warrants to the federal government. Small er community
banks objected to the program’s paperwork requirements, such as the provision of a small-business lending plan and
quarterly reports. See T he White House, “Remarks by the President to Small Business Owners, Community Leaders,
and Members of Congress,” March 16, 2009, at https://obamawhitehouse.archives.gov/the-press-office/remarks-
president -small-business-owners-community-lenders-and-members-congress.
75 P.L. 111-118, the Department of Defense Appropriations Act, 2010, appropriated $125 million ; P.L. 111-144, the
T emporary Extension Act of 2010, appropriated $60 million; P.L. 111-150, To permit the use of previously
appropriated funds to extend the Small Business Loan Guarantee Program, and for other purposes, authorized the SBA
to reprogram $40 million; and P.L. 111-157, the Continuing Extension Act of 2010, appropriated $80 million to extend
the fee reductions and loan modification through May 31, 2010 .
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Act, 2011, authorized the use of any funding remaining from the Smal Business Jobs Act of 2010
to extend the fee subsidies and 90% maximum loan guaranty percentage through March 4, 2011,
or until the available funding was exhausted.76 Funding for these purposes was exhausted on
January 3, 2011.
The Obama Administration argued that TARP and the additional funding for the SBA’s loan
guaranty programs helped to improve the smal business lending environment and supported “the
retention and creation of hundreds of thousands of jobs.”77 Critics argued that smal business tax
reduction, reform of financial credit market regulation, and federal fiscal restraint are the best
means to assist smal business economic growth and job creation.78
More recently, the SBA received $760.982 bil ion in supplemental funding in FY2020 ($761.980
bil ion including regular appropriations) and $324.975 bil ion in supplemental funding in FY2021
($325.897 bil ion including regular appropriations) to assist smal businesses adversely affected
by the COVID-19 pandemic.79 Most of these funds ($813.7 bil ion) were provided to support the
Paycheck Protection Program (PPP).
As of May 31, 2021, the SBA had approved, after cancel ations, 11.8 mil ion PPP loans, totaling
nearly $800 bil ion. For comparative purposes, that loan approval amount is more than the
amount the SBA had approved in al of its loan programs, including disaster loans, during the
previous 29 years (from October 1, 1991, through December 31, 2019; $509.9 bil ion).80
Program Administration
Over the years, the SBA’s Office of Inspector General (OIG) and the U.S. Government
Accountability Office (GAO) have independently reviewed the SBA’s administration of the
SBA’s loan guaranty programs. Although improvements have been noted, both agencies have
reported deficiencies in the SBA’s administration of its loan guaranty programs that they argue
need to be addressed, including issues involving the oversight of 7(a) lenders and the lack of
outcome-based performance measures.

76 P.L. 111-240, the Small Business Jobs Act of 2010, §1111. Section 7(A) Business Loans. T he 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. T he House approved an amended version of the bill, renamed the American Jobs and Closing T ax 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. T he extension provision was subsequently removed from the
bill, which became P.L. 111-205, the Unemployment Compensation Extension Act of 2010.
77 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%20CAPIT AL.docx .
78 Susan Eckerly, “NFIB Responds to President’s Small Business Lending Initiatives,” Washington, DC, October 21,
2009; and NFIB, “ Government Spending,” Washington, DC. Also, see NFIB, “ Government Spending: Small
Businesses Have a Bottom Line – Government Should, T oo,” at https://www.nfib.com/content/issues/economy/
government -spending-small-businesses-have-a-bottom-line-government-should-too-49051/.
79 See P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020; P.L. 116-
136, the CARES Act; P.L. 116-139, the Paycheck Protection Program and Health Care Enhancement Act; and P.L.
116-260, the Consolidated Appropriations Act, 2021.
80 SBA, “WDS Lending Data File,” October 18, 2019; and SBA, “Small Business Administration loan program
performance: T able 2 - Gross Approval Amount by Program, December 31, 2019,” at https://www.sba.gov/document/
report -small-business-administration-loan-program-performance.
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Oversight of 7(a) High-Risk Lenders
On December 1, 2000, the OIG released its FY2001 list of the most serious management
chal enges facing the SBA and included, for the first time, the oversight of SBA lenders.81 The
OIG determined that the SBA had traditional y focused on loan approval volume and loss
(default) rates to evaluate overal program performance and relied on lenders to focus on risk
management. As a result, the OIG concluded that the SBA “continued to guarantee loans to high-
risk franchises and industries without monitoring risks, and w here necessary, implementing
controls to mitigate those risks.”82 Since then, the OIG has determined that the SBA has made
significant progress in improving its oversight of SBA lenders.83 For example, since 2016, the
SBA’s Office of Credit Risk Management (OCRM) has “established performance measures and
risk mitigation goals applicable to each loan program and the entire lending portfolio” and
“conducted portfolio analyses of problem lenders with heavy concentrations in SBA 7(a) lending
and sales on the secondary market.”84
However, an OIG FY2020 audit of the SBA’s oversight of high-risk lenders identified by OCRM
using a composite risk rating methodology introduced in FY2015 indicated that OCRM
completed only 30% of planned high-risk lender reviews for FY2015-FY2017, did not
recommend adequate and consistent risk mitigations actions for 28 of the 33 lenders the OIG
assessed, and reviewers did not communicate loan deficiencies that were noted during the high-
risk lender reviews to SBA approval and purchase loan centers.85 The OIG provided six
recommendations to improve the SBA’s internal controls and communication and to mitigate
losses on loans with material deficiencies. The SBA agreed with the report’s findings and
indicated that it would implement the OIG’s recommendations to improve its oversight of high-
risk lenders.86
Outcome-Oriented Performance Measures
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 smal businesses) provide limited
information about the impact of the loans on participating smal 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

81 SBA, Office of Inspector General (OIG), “FY2001 Agency Management Challenges,” December 1, 200 0, pp. 15-17.
82 SBA, OIG, “Report on the Most Series Management and Performance Challenges Facing the Small Business
Administration in Fiscal Year 2020,” October 11, 2000, p. 9, at https://www.sba.gov/document/report —report -most-
serious-management -performance-challenges-office-inspector-general (hereinafter SBA, OIG, “ Report on the Most
Series Management and Performance Challenges Facing the Small Business Administration in Fiscal Year 2020”) .
83 SBA, OIG, “Report on the Most Series Management and Performance Challenges Facing the Small Business
Administration in Fiscal Year 2021,” October 16, 2001, p. 14, at https://www.sba.gov/document/report—report-most-
serious-management -performance-challenges-office-inspector-general.
84 SBA, OIG, “Report on the Most Series Management and Performance Challenges Facing the Small Business
Administration in Fiscal Year 2020,” p. 9.
85 SBA, OIG, “Audit of SBA’s Oversight of High-Risk Lenders,” Report Number 20-03, November 12, 2019, pp. i, 4,
at https://www.sba.gov/document/report -20-03-audit-sbas-oversight -high-risk-lenders (hereinafter SBA, OIG, “ Audit
of SBA’s Oversight of High-Risk Lenders”).
T he SBA’s composite risk rating methodology includes an assessment of the lender’s portfolio management, asset
management, regulatory compliance, risk management, and special items. Additional factors, such as the lender’s
portfolio and SBA concentration rates, are also used to assess the lender’s level of risk.
86 SBA, OIG, “Audit of SBA’s Oversight of High-Risk Lenders,” pp. i, 4, 9, 10.
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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.87
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.
Specifical y, 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 smal 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.”88 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.89 It recommended that the SBA “develop additional
performance metrics to measure the program’s achievement in assisting microloan borrowers in
establishing and maintaining successful smal businesses.”90
In its response to GAO’s recommendation to develop additional performance measures for the
7(a) program, the SBA formed, in July 2014, an impact evaluation working group to develop a
methodology for conducting impact evaluations of the agency’s programs using administrative
data sources residing at the SBA and in other federal agencies, such as the U.S. Census Bureau
and the Bureau of Labor Statistics.91 Numerous SBA program offices participated in this working
group and each office developed its own program evaluation methodology or established program
evaluation frameworks.92
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.”93 To

87 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.
88 SBA, OIG, 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 (hereinafter SBA, OIG, SBA’s Adm inistration of the Microloan
Program under the Recovery Act).
89 SBA, OIG, SBA’s Administration of the Microloan Program under the Recovery Act, p. 6.
90 SBA, OIG, SBA’s Administration of the Microloan Program under the Recovery Act, p. 7.
91 U.S. Congress, House Committee on Small Business, Attention Needed: Mismanagement at the SBA - The
Adm inistrator Responds, 114th Cong., 2nd sess., January 7, 2016, H.Hrg. 114-035 (Washington: GPO, 2016), p. 38
(hereinafter U.S. Congress, House Committee on Small Business, Attention Needed: Mism anagem ent at the SBA - The
Adm inistrator Responds).
92 U.S. Congress, House Committee on Small Business, Attention Needed: Mismanagement at the SBA - The
Adm inistrator Responds, p. 38.
93 SBA, FY 2017 Congressional Budget Justification and FY 2015 Annual Performance Report, p. 28, at
https://www.sba.gov/sites/default/files/FY17-CBJ_FY15-APR.pdf.
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encourage evidence-based evaluations across its programs, the SBA has created an annual
Enterprise Learning Agenda designed to “help program managers continue to build and use
evidence and to foster an environment of continuous learning.”94 As part of this agenda building
process, the SBA identifies programs for evidence-based evaluation and undertakes both internal
evaluations using available data or contracts with third parties to conduct the evaluations.95
Legislative Activity During the 111th Congress
Congress authorized several changes to the 7(a) program during the 111th Congress in an effort to
increase the number and amount of 7(a) loans.
The Obama Administration’s Proposals
During the 111th 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 bil ion 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 al 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 mil ion to $5 mil ion;
 increase the maximum loan size for the 504/CDC program from $2 mil ion to $5
mil ion for regular projects and from $4 mil ion to $5.5 mil ion for
manufacturing projects;
 increase the maximum loan size for microloans to smal 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 mil ion, and from $3.5 mil ion to $5
mil ion in the subsequent years;
 temporarily increase the cap on SBAExpress loans from $350,000 to $1 mil ion;
and
 temporarily al ow 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.96

94 SBA, “Request for Comments on Small Business Administration Enterprise Learning Agenda,” 83 Federal Register
52608, October 17, 2018.
95 SBA, “FY 2018 Enterprise Learning Agenda,” February 12, 2018, at https://www.sba.gov/sites/default/files/
aboutsbaarticle/FY_2018_Enterprise_Learning_Agenda_OMB_ SBA_Final_2_08_2018-Final_1.pdf.
96 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%20CAPIT AL.docx (hereinafter SBA,
“Administration Announces New Small Business Commercial Real Estate and Working Capital Programs”).
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Arguments for Increasing the SBA’s Maximum Loan Limits
The Obama Administration argued that increasing the maximum loan limits for the 7(a),
504/CDC, Microloan, and SBAExpress programs would al ow the SBA to “support larger
projects,” which would “al ow the SBA to help America’s smal businesses drive long-term
economic growth and the creation of jobs in communities across the country.”97 The
Administration also argued that increasing the maximum loan limits for these programs w ould be
“budget neutral” over the long run and “help improve the availability of smal er loans.”98
Arguments Against Increasing the SBA’s Maximum Loan Limits
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, especial y for the SBAExpress program,
which has experienced somewhat higher default rates than other SBA loan guaranty programs.99
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 smal firms, businesses that have
historical y encountered the greatest difficulties in accessing credit,” and “avoids making smal
borrowers carry a disproportionate share of the risk associated with larger loans.”100
Others argued that creating a smal business direct lending program within the SBA would reduce
paperwork requirements and be more efficient in providing smal businesses access to capital
than modifying existing SBA programs that rely on private lenders to determine if they wil issue
the loans.101 Also, as mentioned, others argued that providing additional resources to the SBA or
modifying the SBA’s loan programs as a means to augment smal business access to capital is il -
advised. In their view, the SBA has limited impact on smal businesses’ access to capital. They
argued that the best means to assist smal business economic growth and job creation is to focus
on smal business tax reduction, reform of financial credit market regulation, and federal fiscal
restraint.102
P.L. 111-5, the American Recovery and Reinvestment Act of 2009
(ARRA)
As mentioned, in 2009, ARRA provided an additional $730 mil ion for SBA programs, including
$375 mil ion to temporarily reduce fees in the SBA’s 7(a) and 504/CDC loan guaranty programs

97 SBA, “Administration Announces New Small Business Commercial Real Estate and Working Capital Programs.”
98 SBA, “Administration Announces New Small Business Commercial Real Estate and Working Capital Programs.”
99 Robb Mandelbaum, “ Small Business Incentives Face a Hard Road in Congress,” New York Times, February 12,
2010, at http://boss.blogs.nytimes.com/2010/02/12/small-business-incentives-face-a-hard-road-in-congress/; and U.S.
Congress, House Committee on Small Business, House Com m ittee on Sm all Business Views With Regard to the Fiscal
Year (FY) 2010 Budget, Letter from Nydia Velázquez, Chair, House Committee on Small Business, to John M. Spratt
Jr., Chair, House Committee on the Budget, 111 th Cong., 2nd sess., March 11, 2009, p. 3.
100 U.S. Congress, House Committee on Small Business, Small Business Financing and Investment Act of 2009 , report
to accompany H.R. 3854, 111th Cong., 2nd sess., October 26, 2009, H.Rept. 111-315 (Washington: GPO, 2009), p. 1.
101 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/.
102 Susan Eckerly, “NFIB Responds to President’s Small Business Lending Initiatives,” Washington, DC, October 21,
2009; and NFIB, “ Government Spending,” Washington, DC. Also, see NFIB, “ Government Spending: Small
Businesses Have a Bottom Line – Government Should, T oo,” at https://www.nfib.com/content/issues/economy/
government -spending-small-businesses-have-a-bottom-line-government-should-too-49051/.
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($299 mil ion) 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 al
standard 7(a) loans ($76 mil ion).103 Congress subsequently provided another $265 mil ion, and
authorized the SBA to reprogram another $40 mil ion, to extend the fee reductions and loan
modification through May 31, 2010.
P.L. 111-240, the Small Business Jobs Act of 2010
P.L. 111-240 provided $505 mil ion (plus $5 mil ion 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 mil ion to $5 mil ion;
 temporarily increased for one year (through September 27, 2011) the cap on
SBAExpress loans from $350,000 to $1 mil ion;
 increased the maximum loan size for the 504/CDC loans from $1.5 mil ion to $5
mil ion for regular projects, from $2 mil ion to $5 mil ion for projects meeting
one of the program’s specified public policy goals, and from $4 mil ion to $5.5
mil ion 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
mil ion and an average net income after federal taxes (excluding any carryover
losses) for the preceding two fiscal years of not more than $5 mil ion; and
 al owed 504/CDC loans to be used to refinance up to $7.5 bil ion 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.104
The act also authorized the Secretary of the Treasury to establish a $30 bil ion Smal Business
Lending Fund (SBLF) to encourage community banks to provide smal business loans ($4 bil ion
was issued), a $1.5 bil ion State Smal Business Credit Initiative to provide funding to
participating states with smal business capital access programs, and about $12 bil ion in tax relief
for smal businesses.105 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.

103 SBA, “Recovery Act Agency Plan,” May 15, 2009, at https://www.sba.gov/sites/default/files/recovery_act_reports/
sba_recovery_act_plan.pdf.
104 P.L. 111-240, the Small Business Jobs Act of 2010, Section 1122. Low-Interest Refinancing Under the Local
Development Business Loan Program.
105 Further analysis of P.L. 111-240, the Small Business Jobs Act of 2010, is in out -of-print CRS Report R41385, Small
Business Legislation During the 111th Congress (available to congressional staff upon request from the author). For
further analysis of the Small Business Lending Fund, see CRS Report R42045, The Sm all Business Lending Fund, by
Robert Jay Dilger. For further analysis of the State Small Business Credit Initiative, see CRS Report R42581, State
Sm all Business Credit Initiative: Im plem entation and Funding Issues, by Robert Jay Dilger.
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Legislative Activity During the 112th Congress
Congress did not approve any changes to the 7(a) program during the 112th Congress. However,
several bil s were introduced during the 112th Congress that would have changed the program.
S. 1828, a bil to increase smal business lending, and for other purposes, was introduced on
November 8, 2011, and referred to the Senate Committee on Smal Business and
Entrepreneurship. The bil 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 original y authorized by ARRA and later extended
by several laws, including the Smal Business Jobs Act of 2010.
H.R. 2936, the Smal Business Administration Express Loan Extension Act of 2011, introduced
on September 15, 2011, and referred to the House Committee on Smal Business, would have
extended a one-year increase in the maximum loan amount for the SBAExpress program from
$350,000 to $1 mil ion for an additional year. The temporary increase in that program’s
maximum loan amount was authorized by P.L. 111-240, the Smal Business Jobs Act of 2010, and
expired on September 27, 2011 (see Appendix A).
S. 532, the Patriot Express Authorization Act of 2011, introduced on March 9, 2011, and referred
to the Senate Committee on Smal Business and Entrepreneurship, would have provided statutory
authorization for the Patriot Express Pilot Program. This program was subsequently discontinued
by the SBA on December 31, 2013. The bil would have increased the program’s maximum loan
amount from $500,000 to $1 mil ion, and it would have increased the guaranty percentages from
up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to up to 85%
of loans of $500,000 or less and up to 80% of loans exceeding $500,000.
Legislative Activity During the 113th Congress
H.R. 2451, the Strengthening Entrepreneurs’ Economic Development Act of 2013, was
introduced on June 20, 2013, and referred to the House Committee on Smal Business. It would
have authorized the SBA to make direct loans of up to $150,000 to businesses with fewer than 20
employees. It would have also required the SBA to assess, collect, and retain a fee w ith respect to
the outstanding balance of the deferred participation share of each 7(a) loan in excess of $2
mil ion that is no more than is necessary to reduce to zero the SBA’s cost of making the loan.
H.R. 2461, the SBA Loan Paperwork Reduction Act of 2013, was introduced on June 20, 2013,
and referred to the House Committee on Smal Business. It would have provided statutory
authorization for the Smal Loan Advantage (SLA) pilot program. The SBA started that program
on February 15, 2011. It provided a streamlined application process for 7(a) loans of up to
$350,000 if the loan received an acceptable credit score from the SBA prior to the loan being
submitted for processing. The SBA adopted the SLA application process as the model for
processing al non-express 7(a) loans of $350,000 or less, effective January 1, 2014.
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 FY2014 (and later extended the fee
waiver in FY2015 and FY2016). H.R. 2462, the Smal Business Opportunity Acceleration Act of
2013, introduced on June 20, 2013, and referred to the House Committee on Smal Business,
would have made the fee waiver permanent.
Also, the Obama Administration waived 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
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FY2015 (cal ed the Veterans Advantage Program). S. 2143, the Veterans Entrepreneurship Act,
would have authorized this fee waiver and made it permanent. Also, P.L. 113-235 provided
statutory authorization to waive the 7(a) SBAExpress program’s guarantee fee for veterans (and
their spouse) in FY2015.
Legislative Activity During the 114th Congress
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.106 The act also increased the 7(a) program’s
authorization limit from $18.75 bil ion in FY2015 to $23.5 bil ion.107
On June 25, 2015, the SBA informed Congress that the 7(a) program “is on track to hit its
authorization ceiling of $18.75 bil ion wel before the end of FY2015.”108 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.”109 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 bil ion in FY2015.110
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.”111
Loans would be released “once program authority became available due to Congressional action
or as a result of cancel ations of loans previously approved this fiscal year.”112 Applications would

106 U.S. Congress, House Committee on Small Business, Veterans Entrepreneurship Act of 2015, report to accompany
H.R. 2499, 114th Cong., 1st sess., June 25, 2015, H.Rept. 114-187 (Washington: GPO, 2015), p. 9.
107 Several bills were introduced during the 114th 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 FY2015 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.
108 Letter from Maria Contreras-Sweet, SBA Administrator, to T he 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 (hereinafter Letter from
Maria Contreras-Sweet, SBA Administrator, to T he Honorable John Boozman, Chair, Subcommittee on Financial
Services and General Government, House Committee on Appropriations).
109 Letter from Maria Contreras-Sweet, SBA Administrator, to T he Honorable John Boozman, Chair, Subcommittee on
Financial Services and General Government, House Committee on Appropriations.
110 Letter from Maria Contreras-Sweet, SBA Administrator, to T he Honorable John Boozman, Chair, Subcommittee on
Financial Services and General Government, House Committee on Appropriations.
111 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 (hereinafter SBA, “ SBA Information Notice: 7(a) Loan Program
Authorization Level,” July 22, 2015).
112 SBA, “ SBA Information Notice: 7(a) Loan Program Authorization Level,” July 22, 2015.
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then “be funded in the order they were approved by SBA, with the exception that requests for
increases to previously approved loans wil be funded before applications for new loans.”113
The SBA resumed 7(a) lending on July 28, 2015, following P.L. 114-38’s enactment.114 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 al ow 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 Smal 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.
P.L. 114-113 increased the 7(a) program’s authorization limit from $23.5 bil ion in FY2015 to
$26.5 bil ion for FY2016. In addition, P.L. 114-223, the Continuing Appropriations and Military
Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, authorized the
SBA to use funds from its business loan program account “to accommodate increased demand for
commitments for [7(a)] general business loans” for the duration of the continuing resolution
(initial y December 9, 2016, later extended by P.L. 114-254, the Further Continuing and Security
Assistance Appropriations Act, 2017, to April 28, 2017).
In a related development, S. 2496, the Help Smal Businesses Access Affordable Credit Act,
introduced on February 2, 2016, would have authorized 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 also requested authorization to al ow
the SBA Administrator to continue to issue loans should the demand for 7(a) loans exceed the
program’s authorization limit.115
Also. S. 2992, the Smal Business Lending Oversight Act of 2016, would have required the
Director of the SBA’s Office of Credit Risk Management (OCRM) to impose penalties on 7(a)
lenders who “knowingly and repeatedly” undertake specified activities;116 required the SBA to

113 SBA, “ SBA Information Notice: 7(a) Loan Program Authorization Level,” July 22, 2015.
114 SBA, “ SBA Information Notice: 7(a) Loan Program Authorization Level,” July 2 8, 2015, at https://www.sba.gov/
sites/default/files/lender_notices/5000-1346.pdf.
115 U.S. Office of Management and Budget, Budget of the United States Government, FY2017; Appendix—Small
Business Adm inistration, p. 1223, at https://www.govinfo.gov/content/pkg/BUDGET -2017-APP/pdf/BUDGET -2017-
APP.pdf. See Section 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%: Provided, T hat 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.
116 T he penalties would have included (1) a warning and an order to comply; (2) if the lender is a participant in the
Preferred Lenders Program, suspension from participating in that program for not less than 90 days and not more than 1
year; (3) prohibiting the lender from issuing 7(a) loans; (4) a civil monetary penalty of not less than $5,000 and not
greater than $250,000; (5) prohibiting a lender from selling in the secondary market, under section 5(f), the guaranteed
portion of any loan made by the lender; and (6) any other penalty that the Director determines to be appropriate after
considering the severity and the frequency of the violations.
T he specified activities were “ (A) fails to properly determine and document that a loan is eligible for financing under
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annual y undertake and report the findings of a risk analysis of the 7(a) program’s loan portfolio;
redefined the credit elsewhere requirement; authorized fees to be used to support OCRM
operations;117 required the SBA to identify potential loan risks by lenders participating in the
Preferred Lenders Program by requiring the SBA, at the end of each year, to “calculate the
percentage of loans in a lender’s portfolio made without a contribution of borrower equity when
the loan’s purpose was to establish a new smal business concern, to effectuate a change of smal
business ownership, or to purchase real estate”; and, among other provisions, prohibited the SBA
from approving any loan if its financing is more than 100% of project costs.
Legislation was also introduced (S. 2125, the Smal Business Lending and Economic Inequality
Reduction Act of 2015) to provide permanent, statutory authorization for the Community
Advantage Pilot program (see Appendix A). The SBA announced on December 28, 2015, that it
was extending the Community Advantage Pilot program through March 31, 2020 (it had been set
to expire on March 15, 2017), and later extended it through September 30, 2022.118
Legislative Activity During the 115th Congress
Recognizing that 7(a) loan approvals during the first half of FY2017 were about 9% higher than
during the first half of FY2016, Congress included a provision in P.L. 115-31, the Consolidated
Appropriations Act, 2017, which increased the 7(a) program’s authorization limit to $27.5 bil ion
in FY2017 from $26.5 bil ion in FY2016. Congress also approved legislation (P.L. 115-141, the
Consolidated Appropriations Act, 2018) that increased the 7(a) program’s authorization limit to
$29.0 bil ion in FY2018.
In addition, P.L. 115-189, the Smal Business 7(a) Lending Oversight Reform Act of 2018, among
other provisions, codified the SBA’s Office of Credit Risk Management; required that office to
annual y undertake and report the findings of a risk analysis of the 7(a) program’s loan portfolio;
created a lender oversight committee within the SBA; authorized the Director of the Office of
Credit Risk Management to undertake informal and formal enforcement actions against 7(a)
lenders under specified conditions; redefined the credit elsewhere requirement;119 and authorized

this Act or regulations promulgated under this Act, including a failure to document that a loan is eligible for financing
under section 7(a) because the applicant is unable to obtain credit elsewhere; (B) sells the guaranteed portion of a loan
under section 5(f) when the proceeds of the loan have not been fully disbursed in accordance with pro gram
requirements; (C) imposes on an applicant for a loan under section 7(a) a fee that the Administration has not
specifically authorized; or (D) re-amortizes a loan solely to make the loan appear current.”
117 Under the bill, the SBA would have been authorized to assess, collect, and retain a fee, not greater than 0.03% per
year of the outstanding balance of the deferred participation share of each loan approved under this subsection . T he
proceeds were to be used “ solely to support the operations of the Office of Credit Risk Management .” Also, the SBA
would have been authorized to collect a fee for any loan guarantee sold into the secondary market under subsection (f)
“in an amount equal to 50% of the portion of the sale price that exceeds 108% of the outstanding principal amount of
the portion of the loan guaranteed by the Administration.”
118 SBA, “Community Advantage Pilot Program,” 80 Federal Register 80873, December 28, 2015; and SBA,
“Community Advantage Pilot Program,” 83 Federal Register 46238, September 12, 2018.
119 Under the act, “T he term ‘credit elsewhere’ means (1) for the purposes of this Act (except as used in section 7(b)),
the availability of credit on reasonable terms and conditions to the individual loan applicant from non -Federal, non-
State, or non-local government sources, considering factors associated with conventional lending practices, including—
(A) the business industry in which the loan applicant operates; (B) whether the loan applicant is an enterprise that has
been in operation for a period of not more than 2 years; (C) the adequacy of the collateral available to secure the
requested loan; (D) the loan term necessary to reasonably assure the ability of the loan applicant to repay the debt from
the actual or projected cash flow of the business; and (E) any other factor relating to the particular credit application, as
documented in detail by the lender, that cannot be overcome except through obtaining a Federal loan guarantee under
prudent lending standards; and (2) for the purposes of section 7(b), the availability of credit on reasonable terms and
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the SBA Administrator to increase the amount of 7(a) loans not more than once during any fiscal
year to not more than 115% of the 7(a) program’s authorization limit. The SBA is required to
provide at least 30 days’ notice of its intent to exceed the 7(a) loan program’s authorization limit
to the House and Senate Committees on Smal Business and the House and Senate Committees
on Appropriations’ Subcommittees on Financial Services and General Government and may
exercise this option only once per fiscal year.
Also, P.L. 115-232, the John S. McCain National Defense Authorization Act for Fiscal Year 2019,
included provisions to make 7(a) loans more accessible to employee-owned smal businesses
(ESOPs) and cooperatives.120 The act authorizes the SBA to make “back-to-back” loans to ESOPs
to better align with industry practices (the loan proceeds must only be used to make a loan to a
qualified employee trust);121 clarifies that 7(a) loans to ESOPs may be made under the Preferred
Lenders Program; al ows the sel er to remain involved as an officer, director, or key employee
when the ESOP or cooperative has acquired 100% ownership of the smal business;122 and
authorizes the SBA to finance transition costs to employee ownership and waive any mandatory
equity injection by the ESOP or cooperative to help finance the change of ownership. The act also
directs the SBA to create outreach programs with Smal Business Investment Companies and
Microloan intermediaries to make their lending programs more accessible to al eligible ESOPs
and cooperatives, an interagency working group to promote lending to ESOPs and cooperatives,
and a Smal Business Employee Ownership and Cooperatives Promotion Program, administered
by Smal Business Development Centers, to offer technical assistance and training to smal
businesses on the transition to employee ownership through cooperatives and ESOPs.
Congress did not focus much attention on the Trump Administration’s proposal in its FY2019
budget request to “introduce counter-cyclical policies in SBA’s business guaranty loan programs
and update certain fees structures to offset $155 mil ion in business loan administration.”123 As
mentioned, the proposal included raising $93 mil ion in additional revenue by
 al owing the SBA to set the 7(a) program’s annual servicing fee at rates below
zero credit subsidy;
 increasing the 7(a) loan program’s FY2019 annual servicing fee’s cap from
0.55% to 0.625%; and
 increasing the FY2019 upfront loan guarantee fee on 7(a) loans over $1 mil ion
by 0.25%.

conditions from non-Federal sources taking into consideration the prevailing rates and terms in the community in or
near where the applicant business concern transacts business, or the applicant homeowner resides, for similar purposes
and periods of time; and (2) in section 7(a)(1)(A)(i) (15 U.S.C. 636(a)(1)(A)(i)), by inserting ‘T he Administrator has
the authority to direct, and conduct oversight for, the methods by which lenders determine whether a borrower is able
to obtain credit elsewhere’ before ‘No financial assistance.’”
120 T hese provisions were originally in H.R. 5236, the Main Street Employee Ownership Act of 2018.
121 Previously, “an SBA ESOP loan [could] … only be made to the ESOP plan within the company, while commercial
banks typically lend to the company which then makes an internal loan to the employee trust to purchase ownership.
T his practice is known as a “back-to-back” loan and allows the company to have some flexibility in how the ESOP
operates, including how quickly employees get their shares so that both current and f uture employees will get
meaningful stock awards.” See “Main Street Employee Ownership Act,” provided by the office of Senator Kirsten
Gillibrand, March 14, 2018.
122 Any seller who remains as an owner, regardless of percentage of ownership interest, may be required to provide a
personal guarantee by the SBA.
123 SBA, FY2019 Congressional Budget Justification and FY2017 Annual Performance Report, p. 32.
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The Administration also requested that the 7(a) loan program’s authorization limit be increased to
$30 mil ion in FY2019; that the SBA be al owed to further increase the 7(a) loan program’s
authorization amount in FY2019 by 15% under specified circumstances “to better equip the SBA
to meet peaks in demand while continuing to operate at zero subsidies;” that the SBA be al owed
to impose an annual fee, not to exceed 0.05% per year, of the outstanding balance on 7(a)
secondary market trust certificates to help offset administrative costs; and that the SBAExpress
program’s loan limit be increased from $350,000 to $1 mil ion.124
Legislative Activity During the 116th Congress
Both the House Committee on Smal Business and the Senate Committee on Smal Business and
Entrepreneurship held numerous hearings on SBA programs and activities during the 116th
Congress. For example, during the first session of the 116th Congress, the Senate Committee held
a series of hearings related to the reauthorization of the Smal Business Act, including hearings
focusing on the SBA’s access to capital programs. Among the many topics discussed were the
7(a) program’s authorization level; providing statutory authorization for the 7(a) Community
Advantage Program; increasing the SBAExpress program’s lending limit, fee waivers, and credit
subsidy determinations; and providing assistance for smal manufacturing firms.
Both committees also reported bil s for floor action and several bil s were passed by the House,
including bil s on cybersecurity, SBA disaster assistance, smal business investment companies,
smal business contracting, the Smal Business Innovation Research and Smal Business
Technology Transfer programs, and smal business size standards. None of these engrossed bil s
would directly affect the 7(a) program.
The following laws, enacted during the first session of the 116th Congress, affected the 7(a)
program:
 P.L. 116-6, the Consolidated Appropriations Act, 2019, provided the SBA
$715.370 mil ion for FY2019 and, among other provisions, increased the 7(a)
program’s authorization limit to $30 bil ion.
 Following the enactment of two continuing appropriations acts (P.L. 116-59, the
Continuing Appropriations Act, 2020, and P.L. 116-69, the Further Continuing
Appropriations Act, 2020), P.L. 116-93, the Consolidated Appropriations Act,
2020, provided the SBA $998.463 mil ion in appropriations for FY2020,
including $99 mil ion for 7(a) loan guaranty credit subsidies.125 The act also
continued the 7(a) program’s authorization limit at $30 bil ion.
The House Committee on Smal Business and the Senate Committee on Smal Business and
Entrepreneurship focused much of its attention during the second session of the 116th Congress on
legislation designed to assist smal businesses adversely affected by the COVID-19 pandemic.
The following laws, enacted during the second session of the 116th Congress, affected the 7(a)
program:

124 T he specified circumstances are “if program demand were to exh aust the appropriated limit” and providing written
notice, at least 15 days in advance, to the House and Senate Committees on Appropriations and Small Business. See
SBA, FY2019 Congressional Budget Justification and FY2017 Annual Perform ance Report , p. 32; and OMB, Budget
of the United States Governm ent, FY2019; Appendix—Small Business Adm inistration, p. 1113, at
https://www.whitehouse.gov/wp-content/uploads/2018/02/sba-fy2019.pdf.
125 P.L. 116-123, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 , subsequently
provided the SBA an additional $20 million for disaster loan administrative expenses.
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 P.L. 116-136, the CARES Act, among other provisions, increased the 7(a) loan
authorization limit (including the PPP) from $30 bil ion to $349 bil ion and
appropriated $17 bil ion for six-month payment relief for existing 7(a), 504/CDC,
or Microloan borrowers. Loans made up until six months after enactment (until
September 27, 2020) also receive six months of loan payments. The act also
temporarily increased the SBAExpress loan limit from $350,000 to $1 mil ion
(reverts to $350,000 on January 1, 2021) and permanently eliminated the zero
subsidy requirement to waive SBAExpress loan fees for veterans.
 P.L. 116-139, the Paycheck Protection Program and Health Care Enhancement
Act, among other provisions, increased the 7(a) loan authorization limit
(including the PPP) from $349 bil ion to $659 bil ion and appropriated an
additional $2.1 bil ion for the SBA’s salaries and expenses account (to remain
available until September 30, 2021).
 P.L. 116-147, to extend the authority for commitments for the paycheck
protection program, among other provisions, provided separate authorization
limits of $659 bil ion for PPP and $30 bil ion for 7(a) loan commitments.
 P.L. 116-260, the Consolidated Appropriations Act, 2021, appropriated $921.733
mil ion for the SBA for FY2021, including $15 mil ion for 7(a) loan guaranty
credit subsidies, and continued the 7(a) loan authorization limit at $30 bil ion. In
addition, the Economic Aid to Hard-Hit Smal Businesses, Nonprofits, and
Venues Act (Division N, Title III of the Consolidated Appropriations Act, 2021),
among other provisions, appropriated an additional $324.975 bil ion for the SBA
(for a total of $325.897 bil ion), authorized an additional $75 bil ion for 7(a) loan
commitments (for a total of $105 bil ion), and appropriated $3.5 bil ion to resume
monthly payment relief for 7(a), 504/CDC, and Microloan borrowers, capped at
$9,000 per month per borrower. Payments are dependent on the availability of
funds, when the loan was disbursed, the type of loan received, and the business’s
industry.126 The act also extended the temporary increase in the SBAExpress loan
limit from $350,000 to $1 mil ion (reverting to $500,000 on October 1, 2021),
increased the SBAExpress guaranty rate for loans of $350,000 or less from 50%
to 75% in FY2021, waived the SBA’s fees for the 7(a) and 504/CDC loan
guarantee programs in FY2021, and increased the 7(a) program’s guaranty rate
from 85% for loans of $150,000 or less and 75% for loans greater than $150,000
(up to a maximum guaranty of $3.75 mil ion—75% of $5 mil ion) to 90% in
FY2021.
Concluding Observations
The smal business relief legislation enacted during the 116th Congress included several
provisions that were enacted during the 111th Congress to address the Great Recession, such as
fee waivers, increased loan limits, and increased loan guarantee percentages. However, the
legislation enacted during the 116th Congress is fundamentally different from the legislation
enacted during the 111th Congress. First, it is much larger in scale ($1.086 tril ion in supplemental

126 For example, the SBA will pay at least three additional monthly payments on loans that were in repayment before
March 27, 2020, starting with the next payment due on or after February 1, 2021. After the first three monthly
payments are provided, businesses with an SBA Community Advantage loan, Microloan, or operating in specified
economically hard-hit industries will receive an additional five monthly payments. Also, loans approved from February
1, 2021, through September 30, 2021, will receive six monthly p ayments beginning with the first payment due.
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appropriations) than the legislation enacted during the 111th Congress ($1.693 bil ion in
supplemental appropriations). Second, expectations about repayment are much different, as the
smal business relief legislation enacted during the 116th Congress includes PPP loan forgiveness
and monthly debt relief payments for 7(a), 504/CDC, and Microloan borrowers. Third, the
legislation enacted during the 116th greatly expanded program eligibility, including, for the first
time, eligibility for specific types of nonprofit organizations.
In terms of recent program changes, efforts to increase the 7(a) program’s loan limit, provide fee
subsidies, increase the maximum loan guaranty percentage, and expand 7(a) eligibility criteria
were (and are) designed to create and retain jobs by increasing the ability of 7(a) borrowers to
access credit at affordable rates.
Initial y, the focus was on providing relief as quickly as possible to prevent smal business
failures and job loss, processing PPP loan and forgiveness applications as expeditiously as
possible, and ensuring that underserved populations were able to access the relief. In the coming
months, congressional oversight is likely to focus increased attention on the SBA’s administration
of these programs, especial y the SBA’s efforts to deter fraud, and the impact these programs
have on smal business survival and job creation and retention.
Among the lessons learned from the 111th Congress are the potential benefits that can be derived
from providing additional funding for the SBA’s Office of Inspector General (OIG) and the
Government Accountability Office (GAO). GAO and the SBA’s OIG can provide Congress
information that could prove useful as Congress engages in congressional oversight of the SBA’s
administration of these programs, provide an early warning if unforeseen administrative problems
should arise, and, through investigations and audits, serve as a deterrent to fraud.
Requiring the SBA to report regularly on its implementation of these programs could also
promote transparency and assist Congress in performing its oversight responsibilities. In addition,
requiring output and outcome performance measures and requiring the SBA to report this
information directly to both Congress and the public by posting that information on the SBA’s
website could enhance both congressional oversight and public confidence in the SBA’s efforts to
assist smal businesses.
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Appendix A. 7(a) Specialized Programs
The 7(a) program has several specialized programs that offer streamlined and expedited loan
procedures for particular groups of borrowers, including the SBAExpress and Community
Advantage programs. Lenders must be approved by the SBA for participation in these programs.
SBAExpress Program
The SBAExpress program was established as a pilot program by the SBA on February 27, 1995,
and made permanent through legislation, subject to reauthorization, in 2004 (P.L. 108-447, the
Consolidated Appropriations Act, 2005).127 The program is designed to increase the availability of
credit to smal businesses by permitting lenders to use their existing documentation and
procedures in return for receiving a reduced SBA guaranty on loans.128 It provides a 50% loan
guaranty on loan amounts up to $350,000.
As mentioned, the CARES Act temporarily increased the SBAExpress loan limit from $350,000
to $1 mil ion (reverting to $350,000 on January 1, 2021). P.L. 116-260, the Economic Aid to
Hard-Hit Smal Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated
Appropriations Act, 2021), among other provisions, extended the temporary increase in the
SBAExpress loan limit from $350,000 to $1 mil ion (reverting to $500,000 on October 1, 2021)
and increases the SBAExpress guaranty rate for loans of $350,000 or less from 50% to 75% in
FY2021.
As shown in Table A-1, the SBA approved 18,092 SBAExpress loans (41.8% of total 7(a)
program loan approvals), totaling $1.67 bil ion (7.4% of total 7(a) program amount approvals) in
FY2020. The program’s higher loan amount in FY2011 was due, at least in part, to a provision in
P.L. 111-240, the Smal Business Jobs Act of 2010, which temporarily increased the SBAExpress
program’s loan limit to $1 mil ion for one year following enactment (through September 27,
2011).
Table A-1. SBAExpress Loan Approvals, FY2011-FY2020
Amount of Loan Approvals
Fiscal Year
# of Loan Approvals
($ in billions)
2011
26,563
$2.84
2012
22,974
$1.75
2013
21,612
$1.65
2014
26,556
$1.91
2015
32,272
$2.20
2016
32,58
$2.16
2017
29,463
$2.11
2018
27,807
$1.98

127 T he SBAExpress program was initially called FA$T RAK and offered a 50% loan guaranty on loans of up to
$100,000. FA$T RAK’s program guidance was issued on March 6, 1995. See SBA, “ FA$T RAK,” 60 Federal Register
12271-12275, March 6, 1995. A brief history of the SBAExpress program is provided in SBA, “ SBAExpress P rogram
Guide,” (effective October 1, 2002), p. 3, at https://www.sba.gov/sites/default/files/files/
sba_elending_clc_sbaexpress.pdf.
128 SBA, “T he SBA Express Pilot Program: Inspection Report,” June 1998, p. 3.
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Amount of Loan Approvals
Fiscal Year
# of Loan Approvals
($ in billions)
2019
22,770
$1.74
2020
18,092
$1.67
Sources: U.S. Smal Business Administration, “SBA Lending Statistics for Major Programs (as of 9/30/2016),” at
https://www.sba.gov/sites/default/files/aboutsbaarticle/SBA_Lending_Statistics_for_Major_Prog rams_as_of_09-
30-2016.pdf; and “SBA Lending Statistics for Major Programs (as of 9/30/2020),” at https://www.sba.gov/
document/report-2020-weekly-lending-reports.
During the 112th Congress, H.R. 2936, the Smal Business Administration Express Loan
Extension Act of 2011, would have extended the SBAExpress program’s higher loan limit for an
additional year (through September 27, 2012). Also, as mentioned previously, the Trump
Administration has requested that the SBAExpress loan limit be increased to $1 mil ion.
SBAExpress loan proceeds can be used for the same purposes as those of the 7(a) program
(expansion, renovation, new construction, the purchase of land or buildings, the purchase of
equipment, fixtures, and lease-hold improvements, working capital, to refinance debt for
compel ing reasons, seasonal line of credit, and inventory); except that participant debt restructure
cannot exceed 50% of the project and may be used for revolving credit. The program’s loan terms
are the same as those of the 7(a) program (the loan maturity for working capital, machinery, and
equipment (not to exceed the life of the equipment) is typical y 5 years to 10 years; and the loan
maturity for real estate is up to 25 years, except that the term for a revolving line of credit cannot
exceed 7 years.
The SBAExpress loan program’s maximum al owable fixed interest rates and fees are the same as
those for regular 7(a) loans.129 SBAExpress lenders may charge borrowers somewhat higher
variable interest rates than those al owed for regular 7(a) loans.130
To account for the program’s lower guaranty rate of 50%, lenders are al owed to perform their
own loan analysis and procedures and receive SBA approval with a targeted 36-hour maximum
turnaround time.131 Also, collateral is not required for loans of $25,000 or less. Lenders are
al owed to use their own established collateral policy for loans over $25,000.
As mentioned, the SBA waived the up-front, one-time loan guaranty fee for 7(a) loans of
$125,000 or less approved in FY2018. The SBA also waived 50% of the up-front, one-time loan
guaranty fee on al non-SBAExpress 7(a) loans to veterans of $125,001 to $350,000 in FY2018.
In addition, P.L. 114-38, the Veterans Entrepreneurship Act of 2015, provided statutory
authorization and made permanent the veteran’s fee waiver in the SBAExpress program, except
during any upcoming fiscal year for which the President’s budget, submitted to Congress,

129 SBA, “Express Loan Programs; Affiliation Standards,” 85 Federal Register 7622-7633, February10, 2020.
130 SBAExpress lenders may charge up to 4.5% over the prime rate on loans over $50,000 and up to 6.5% over the
prime rate for loans of $50,000 or less, regardless of the maturity of the loan. See SBA, “Express Loan Programs;
Affiliation Standards,” 85 Federal Register 7625, February10, 2020.
T he maximum interest rates allowed for 7(a) variable rate loans with a maturity less than seven years are the base rate
(choice of prime, LIBOR, or SBA optional peg rate) plus 4.25% for loans less than $25,000; the base rate plus 3.25%
for loans of $25,000-$50,000; and the base rate plus 2.25% for loans over $50,000. T he maximum interest rate s
allowed for 7(a) variable rate loans with a maturity of seven years or longer ar e the base rate plus 4.75% for loans less
than $25,000; the base rate plus 3.75% for loans of $25,000 -$50,000; and the base rate plus 2.75% for loans over
$50,000. See 13 C.F.R. §120.214 and 13 C.F.R. §120.215.
131 SBA, “SBAExpress,” at https://www.sba.gov/partners/lenders/7a-loan-program/types-7a-loans#section-header-4.
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includes a cost for the 7(a) program, in its entirety, which is above zero. The SBA waived this fee
in FY2016-FY2019. As mentioned, the CARES Act permanently eliminated the zero subsidy
requirement.
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.”132
In a related development, the SBA discontinued the Patriot Express Pilot Program on December
31, 2013. It provided loans of up to $500,000 (with a guaranty of up to 85% of loans of $150,000
or less and up to 75% of loans exceeding $150,000) to veterans and their spouses.133 It had been
in operation since 2007, and, like the SBAExpress program, featured streamlined documentation
requirements and expedited loan processing. Over its history, the Patriot Express Pilot Program
disbursed 9,414 loans amounting to more than $791 mil ion.134
Community Advantage 7(a) Loan Initiative
The SBA’s Community Advantage (CA) 7(a) loan initiative became operational on February 15,
2011.135 Original y announced as a three-year pilot program (through March 15, 2014), it
subsequently was extended through March 15, 2017; March 31, 2020; and September 30, 2022.136
As of September 12, 2018, there were 113 approved CA lenders, 99 of which were actively
making and servicing CA loans.137
The CA loan initiative is designed to meet the credit, management, and technical assistance needs
of smal businesses located in underserved low- and moderate-income communities. It, along
with the now-discontinued Smal Loan Advantage program,138 replaced the Community Express
Pilot Program, which also was designed to increase lending to underserved communities.139

132 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.
133 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 T ransition 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.
134 SBA, Office of Congressional and Legislative Affairs, correspondence with the author, February 21, 2014.
135 SBA, “Community Advantage Pilot Program,” 76 Federal Register 9627, February 18, 2011; 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.
136 SBA, “Community Advantage Pilot Program,” 77 Federal Register 67433, November 9, 2012; SBA, “Community
Advantage Pilot Program,” 80 Federal Register 80873, December 28, 2015; and SBA, “Community Advantage Pilot
Program,” 83 Federal Register 46238, September 12, 2018.
137 SBA, “Community Advantage Pilot Program,” 83 Federal Register 46238, September 12, 2018.
138 T he 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. T he 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 . T he
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. T he program was expanded to all SBA lenders
on June 1, 2012. T he 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 .
139 U.S. Congress, House Committee on Small Business, Small Business Financing and Investment Act Of 2009 , report
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The CA loan initiative provides the same loan terms, guaranty fees, and 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). Loan proceeds can be used for the same purposes as those of the 7(a)
program.140 The loan’s maximum interest rate is prime, plus 6%.141
The CA initiative is designed to increase access to capital for smal businesses located in
underserved communities by al owing non-traditional, mission-oriented lenders that are focused
on economic development to participate in the 7(a) program; and by providing management and
technical assistance to smal businesses located in underserved communities on an as needed
basis.142 These mission-focused financial institutions include
 nonfederal y regulated Community Development Financial Institutions certified
by the U.S. Department of the Treasury,
 SBA’s Certified Development Companies,
 SBA’s nonprofit Microloan program intermediaries, and, added in December
2015,
 SBA’s Intermediary Lending Pilot Program intermediaries.143
CA lenders are required to maintain at least 60% of their SBA loan portfolio in underserved
markets, including loans to smal 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 two years); businesses
eligible for the SBA’s Veterans Advantage program; Promise Zones (added in December 2015);
and Opportunity Zones and Rural Areas (added in October 2018).144
The SBA placed a moratorium, effective October 1, 2018, on accepting new CA lender
applications, primarily as a means to mitigate the risk of future loan defaults.145 The SBA also

to accompany H.R. 3854, 111th Cong., 2nd sess., October 26, 2009, H.Rept. 111-315 (Washington: GPO, 2009), p. 7.
T he SBA indicated that the Community Express Pilot Program, which was created in May 1999 and ended on April 30,
2011, provided loans “ to new businesses, minority businesses and other underserved sectors” but with “ significantly
higher default rates (almost 40% of loans defaulted in certain cohorts) compared with other similarly sized 7(a) loans.”
See SBA, “ Community Express Pilot Program,” 75 Federal Register 80562, December 22, 2010.
140 SBA, “Community Advantage Participant Guide,” effective June 15, 2020, pp. 6, 7, at https://www.sba.gov/
document/support -community-advantage-participant-guide (hereinafter SBA, “ Community Advantage Participant
Guide”).
141 SBA, “Community Advantage Participant Guide,” p. 8; and SBA, “Community Advantage Pilot Program,” 77
Federal Register 6619, February 8, 2012.
142 SBA, “Community Advantage Participant Guide,” p. 5.
143 SBA, “Community Advantage Participant Guide,” p. 5; and SBA, “Community Advantage Pilot Program,” 80
Federal Register 80873, December 28, 2015.
144 T he 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.” T he first five Zones are located in San Antonio , Philadelphia, Los Angeles,
Southeastern Kentucky, and the Choctaw Nation of Oklahoma. See T he 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, “ Community Advantage Participant Guide,” p.
6; SBA, “ Community Advantage Pilot Program,” 80 Federal Register 80874, December 28, 2015; and SBA,
“Community Advantage Pilot Program,” 83 Federal Register 46239, September 12, 2018.
145 T he SBA indicated that “ Given the increased risk of CA loans as compared to other 7(a) loans, the need for more
resource-intensive oversight of CA Lenders, and the fact that the CA Pilot Program already includes a sufficient
number of geographically dispersed CA Lenders, SBA has decided to place a moratorium on acceptance of new CA
Lender applications. Effective October 1, 2018, SBA will no longer accept CA Lender Applications (SBA Form
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 increased the minimum acceptable credit score for CA loans “that satisfies the
need to consider several required underwriting criteria” from 120 to 140;146
 increased the wait time for CA lenders ineligible for delegated lender status at the
time of approval as a CA lender from 6 months to 12 months and increased the
number of CA loans that must be initial y dispersed before a CA lender may
process applications under delegated authority from five to seven loans;147
 increased the loan loss reserve requirement for CA loans sold in the secondary
market from 3% to 5% of the outstanding amount of the guaranteed portion of
each loan;148
 modified requirements related to the refinancing of debts with a CA loan;149
 limited fees that can be charged by a CA lender for assistance in obtaining a CA
loan to no more than $2,500, with the exception of necessary out-of-pocket costs
such as filing or recording fees;150 and
 as mentioned previously, added Opportunity Zones and Rural Areas to the list of
economical y distressed communities that are eligible for a CA loan.151
On March 2, 2020, the SBA announced in the Federal Register that it would accept new
applications from lenders interested in participating in the Community Advantage program to
replace lenders that voluntarily withdraw from the program, are not renewed, or are otherwise
removed from the program.152 The SBA also modified requirements related to refinancing non-
SBA guaranteed, same institution debt, and increased the number of Community Advantage loans
necessary for a lender to be provided delegated authority from 7 to 10.153
On July 15, 2020, the SBA announced that it was creating a temporary Community Advantage
Recovery Loan program to assist smal businesses located in underserved markets that have
experienced economic hardship due to the COVID-19 pandemic. All Community Advantage
Recovery Loans had to be approved by September 27, 2020, be fully disbursed by October 1,
2020, and have at least a five-year loan term. Al other Community Advantage loan terms and
conditions apply, other than lenders are authorized to charge an “extraordinary servicing fee” of

2301).” See SBA, “ Community Advantage Pilot Program,” 83 Federal Register 46239, September 12, 2018.
146 SBA, “Community Advantage Pilot Program,” 83 Federal Register 46240, September 12, 2018.
147 SBA, “Community Advantage Pilot Program,” 83 Federal Register 46239-46240, September 12, 2018.
148 T he Community Advantage loan initiative also has a loan loss reserve requirement for CA loans not sold in the
secondary market. T hat requirement is 5% of the outstanding amount of the guaranteed portion of each loan. See SBA,
“Community Advantage Pilot Program,” 83 Federal Register 46240, September 12, 2018.
149 “Also, the SBA is modifying the requirements for refinancing n on-SBA guaranteed, same institution debt to require
a transcript showing the due dates and when payments were received for the most recent 12 month period, rather than 6
months. If there are any late payments in the most recent 12 month period, the debt ma y not be refinanced with a CA
loan. In addition, debts on the CA Lender’s books for less than 12 months may not be refinanced with a CA loan.” See
SBA, “Community Advantage Pilot Program,” 83 Federal Register 46239, September 12, 2018.
150 Previously, CA lenders could charge an applicant reasonable fees (customary for similar lenders in the geographic
area where the loan is being made) for packaging and other services. See SBA, “ Community Advantage Pilot
Program,” 83 Federal Register 46240, September 12, 2018.
151 SBA, “Community Advantage Pilot Program,” 83 Federal Register 46239, September 12, 2018.
152 SBA, “Community Advantage Pilot Program,” 85 Federal Register 12369-12370, March 2, 2020.
153 SBA, “Community Advantage Pilot Program,” 85 Federal Register 12370, March 2, 2020.
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up to $2,500 or 9% of the loan amount, whichever is greater, to provide at least 15 hours of
technical and management assistance to the borrower.154
As shown in Table A-2, the SBA approved 537 CA loans totaling $76.1 mil ion in FY2020 and
6,390 CA loans totaling $853.67 mil ion from the time the program became operational in
FY2011 to the end of FY2020.
Table A-2. Community Advantage Loan Approvals, FY2011-FY2020
Amount of Loan Approvals
Fiscal Year
# of Loan Approvals
($ in millions)
2011
15
$2.14
2012
188
$25.24
2013
273
$38.20
2014
453
$56.47
2015
828
$103.52
2016
988
$123.02
2017
1,043
$137.60
2018
1,118
$157.53
2019
947
$133.81
2020
537
$76.14
Total
6,390
$853.67
Source: U.S. Smal Business Administration, Office of Legislative and Congressional Affairs, correspondence with
the author, November 1, 2017 and October 26, 2018; and U.S. Smal Business Administration, “SBA Lending
Statistics for Major Programs (as of 9/30/2020),” at https://www.sba.gov/document/report-2020-weekly-lending-
reports.
As mentioned, legislation was introduced during the 114th Congress (S. 2125, the Smal Business
Lending and Economic Inequality Reduction Act of 2015) and the 116th Congress (S. 2361, the
Closing the Credit Gap Act) to provide the Community Advantage Pilot program permanent,
statutory authorization.

154 SBA, “Community Advantage Pilot Program T emporary Changes-Community Advantage Recovery Loans,” 85
Federal Register 42965, July 15, 2020. For a list of Community Advantage Recovery Loan lenders, see SBA, “ CARL
Lenders by State,” at https://www.sba.gov/document/support -carl-lenders-state.
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Appendix B. Key Provisions in the CARES Act
(P.L. 116-136)
 Established a $349 bil on Paycheck Protection Program (PPP) to provide
forgivable “covered loans” through June 30, 2020, with a 100% SBA loan
guarantee, a maximum term of 10 years, and an interest rate not to exceed 4% to
assist smal businesses and other specified organizations adversely affected by
COVID-19. The SBA announced that the loans wil have a two-year term at a
1.0% interest rate. The PPP’s authorization level was increased to $659 bil ion by
P.L. 116-139, the Paycheck Protection Program and Health Care Enhancement
Act, and to $806.45 bil ion by the Economic Aid to Hard-Hit Smal Businesses,
Nonprofits, and Venues Act (Division N, Title III of the Consolidated
Appropriations Act, 2021). The availability of PPP loans was extended to August
8, 2020, by P.L. 116-147, to extend the authority for commitments for the
paycheck protection program, and to March 31, 2021, by the Economic Aid to
Hard-Hit Smal Businesses, Nonprofits, and Venues Act (Division N, Title III of
the Consolidated Appropriations Act, 2021). P.L. 116-142, the Paycheck
Protection Program Flexibility Act, increased the minimum loan maturity to five
years for loans made on or after the date of enactment (June 5, 2020).
 Waived the up-front loan guarantee fee and annual servicing fee, the no credit
elsewhere requirement, and the requirements for collateral and a personal
guarantee for a covered loan.
 Provided PPP eligibility to 7(a) eligible businesses and any business, 501(c)(3)
nonprofit organization, 501(c)(19) veteran’s organization, or Tribal business that
has 500 or fewer employees or, if applicable, the SBA’s size standard in number
of employees for the industry in which they operate. Sole proprietors,
independent contractors, and eligible self-employed individuals are also eligible.
The term employee includes individuals employed on a full-time, part-time, or
other basis.
 Set the maximum PPP loan amount as the lesser of (1) 2.5 times the average total
monthly payments by the applicant for payroll costs incurred during the one-year
period before the date on which the loan is made plus the outstanding balance of
any pre-existing Economic Injury Disaster Loan made on or after January 31,
2020 that is refinanced into the PPP loan, or (2) $10 mil ion.
 Al ows PPP loans to be used for al al owable 7(a) loan uses, but, to receive full
loan forgiveness, borrowers must use the loan proceeds for payroll costs, costs
related to the continuation of group health care benefits during periods of paid
sick, medical, or family leave, and insurance premiums, employee salaries,
commissions, or similar compensations, mortgage interest payments, rent,
utilities, and interest on any other debt obligations that were incurred before the
covered period. Due to anticipated high subscription, the SBA required borrowers
to spend at least 75% of their loan amount on payroll. P.L. 116-142 lowered the
SBA’s 75% payroll threshold to 60%.
 Expanded lender delegated loan approval authority for making PPP loans to al
7(a) lenders and requires borrowers to, among other acknowledgements, make a
good faith certification that the loan is needed because of the uncertainty of
current economic conditions and to support ongoing operations.
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 Authorized complete payment deferment relief on PPP loans (principal, interest,
and fees) for not less than six months and not more than one year if the borrower
was in operation on February 15, 2020. The SBA announced that because the
interest rate is modest (1%) and the loan may be forgiven, PPP loan deferment
wil be for six months and that principal and interest wil accrue and, if not
forgiven, wil need to be repaid.
 Appropriated $17 bil ion to pay the principal, interest, and any associated fees
that are owed on an existing 7(a), 504/CDC, or Microloan for a six-month period
starting on the next payment due. Loans made up until six months after
enactment (until September 27, 2020) also receive six months of loan payments.
The Economic Aid to Hard-Hit Smal Businesses, Nonprofits, and Venues Act
(Division N, Title III of the Consolidated Appropriations Act, 2021) appropriated
$3.5 bil ion to resume monthly payment relief for 7(a), 504/CDC, and Microloan
borrowers, capped at $9,000 per month per borrower. Payments are dependent on
the availability of funds, when the loan was disbursed, the type of loan received,
and the business’s industry.
 Provides for the forgiveness of PPP loan amounts equal to the amount the
borrower spent during an eight-week period after the loan’s origination date on
payroll costs, interest payment on any mortgage incurred prior to February 15,
2020, payment of rent on any lease in force prior to February 15, 2020, and
payment on any utility for which service began before February 15, 2020. P.L.
116-142, the Paycheck Protection Program Flexibility Act, extended the PPP loan
forgiveness period from 8 weeks after the loan’s origination date to the earlier of
24 weeks or December 31, 2020. PPP borrowers that received a loan prior to
enactment (June 5, 2020) may elect to remain under the eight-week period. The
forgiveness cannot exceed the loan’s principal amount. The Economic Aid to
Hard-Hit Smal Businesses, Nonprofits, and Venues Act (Division N, Title III of
the Consolidated Appropriations Act, 2021) al ows PPP borrowers to elect to
remain under the eight-week period regardless of when they received the loan.
 Reduced the loan forgiveness proportional y by formulas related to the
borrower’s retention of full-time equivalent employees and by the amount of any
reduction in pay of any employee beyond 25% of their salary or wages during the
most recent full quarter before the covered period. Borrowers that re-hire workers
previously laid off are not penalized for having a reduced payroll at the beginning
of the period. Cancel ed debt resulting from loan forgiveness is not included in
the borrower’s taxable federal income.
 Temporarily increased the SBAExpress loan limit from $350,000 to $1 mil ion
(reverts to $350,000 on January 1, 2021). The Economic Aid to Hard-Hit Smal
Businesses, Nonprofits, and Venues Act (Division N, Title III of the Consolidated
Appropriations Act, 2021) extended the temporary increase in the SBAExpress
loan limit from $350,000 to $1 mil ion (reverting to $500,000 on October 1,
2021) and increases the SBAExpress guaranty rate for loans of $350,000 or less
from 50% to 75% in FY2021.
 Eliminated the zero subsidy requirement to waive SBAExpress loan fees for
veterans.

Congressional Research Service
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Small Business Administration 7(a) Loan Guaranty Program

Author Information

Robert Jay Dilger

Senior Specialist in American National Government

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Congressional Research Service
R41146 · VERSION 124 · UPDATED
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