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SBA lending program on a roll; Congress set to raise limit

The Small Business Administration’s flagship lending program is on a roll – so much so, Congress has to step in to keep the momentum going.

The SBA on Thursday hit the limit – $18.75 billion – for 7(a) loans that the SBA can guarantee in a fiscal year. Congress is about to raise the limit to $23.5 billion. The Senate approved raising the limit; the House of Representatives is expected to act next week.

Under the 7(a) program, the federal government provides guarantees for up to 85 percent of the amount of the principal of the loan. It is designed to help businesses that might otherwise have difficulty obtaining loans, by giving banks more reassurance to lend to them. Businesses use the loans for purposes like expansion and working capital.

The federal fiscal year runs through Sept. 30, so unless the limit on guaranteed loans was raised, applicants would have had to wait until October for new loans to be approved. Instead, it looks like the interruption will last only a few days.

In the meantime, banks are still accepting applications for the program, and the SBA is still processing them up, to the point of approval.

Neil Hosty, senior vice president of business banking for M&T, said it’s a good sign that so many businesses want to use the program, and he doesn’t expect the delay to cause long-term problems.

“In terms of a slowdown, it’s probably three or four days, which in the delivery model is OK,” Hosty said. “Customers will be able to do what they were going to do in that period. It would have been a disaster if it carried through.”

Since it often takes a few weeks from the time a customer applies for a loan to when the SBA approves it, it’s unlikely a customer applying now would see any impact, Hosty said. If anyone would see an effect, he said, it would probably be an applicant who is about to close on a loan, but M&T is reaching out to assure them that “they’ll be just fine and we’ll get this done.”

The SBA said it has already approved more than 45,000 loans this fiscal year totaling more than $16.5 billion, up 25 percent over the same period a year ago. In the Buffalo-Rochester region, the volume of approved loans for the first nine months of the fiscal year was $104 million, up 20 percent from the same period a year ago. M&T led the pack with $21 million in loans.

M&T in the past couple of years has seen customers of the program shifting from refinancing of existing assets to capital investments in the businesses, Hosty said.

SBA officials are looking to getting back to approving 7(a) loans.

“We continue to work with the House of Representatives and are confident that it will promptly pass similar legislation, allowing the SBA to continue supporting American small businesses as they grow and create jobs to strengthen the nation’s economy,” the SBA said in a statement.