The SBA recently suspended their 7(a) loan program, which is the most widely used program the SBA offers. The good news is that this program is now back in business. The bad news is that although the program has begun funding again, it is now has a much lower cap and a much lower guarantee rate.
The program used to fund up to $2 million loans and guarantee at a rate of 80%. Under the new criteria, this program will only loan $750,000 and guarantee at a rate of 50%. The impact of this change can be seen by its impact on one entrepreneurial venture here in Nashville. As reported in today?s Tennessean, ?Ted R. Sanders Moving and Warehouse Inc. in Nashville thought they had a done deal in December when a lender approved a $1.5 million mortgage loan? funded under the SBA 7(a) program. Even though the program is back in operation, at least sort of, it no longer can support the kind of loan this business had been planning of for its expansion.
This recovery is, as we?ve pointed out time and time again on this blog site, an entrepreneurial recovery. If the Feds are serious about understanding and sustaining the current expansion, they need to not only pay attention to where the real job growth is occurring (as evidenced by the household survey), but support those programs that will expand this entrepreneurial recovery like 7(a).
