Senate vote gives the SBA's 7(a) program a last-minute reprieve

The Small Business Administration's 7(a) program is set to receive funding to keep operating into the 2020 fiscal year.

A major lobbying effort by the program's backers paid off Thursday, after the Senate approved a funding resolution for 7(a). The House approved the same measure last week.

The measure includes $99 million earmarked to pay for the program’s credit costs for the 2020 fiscal year. Absent that subsidy, the 7(a) program would have been forced to shut down on Oct. 1, the start of the government’s fiscal year.

Earlier this month, a coalition of 7(a) advocates, including three major banking trade associations and the National Association of Government Guaranteed Lenders, pressed senators to approve the subsidy to avert what would have been the second 7(a) shutdown this year.

Rebeca Romero Rainey, the prsident and CEO of the Independent Community Bankers of America ,followed that effort with a letter Thursday urging senators to avoid what she feared would be “an abrupt cut off of credit to thousands of small businesses.”

The 7(a)’s budget crisis was triggered in March, when the SBA submitted a budget request claiming that the user fees that have covered the program’s credit costs in recent years would be insufficient for the 2020 fiscal year. The agency asked lawmakers to make up the predicted shortfall by increasing fees or appropriating $99 million for a credit subsidy.

The last time the SBA sought a 7(a) credit subsidy was for the 2013 fiscal year.

Under the terms of the 1990 Federal Credit Reform Act, credit programs such as 7(a) cannot continue operating unless projected credit shortfalls are addressed through fees or a congressional subsidy appropriation.

While advocates for 7(a) have criticized the subsidy request, noting that estimated credit costs have been revised downward every year since the 2010 fiscal year, they pressed lawmakers to approve it to keep the program open.

“We fully expect that any appropriated funds will be returned to the Treasury,” Romero Rainey wrote in her letter.

In the 2018 fiscal year, credit costs for 7(a) totaled $430.7 million, according to the SBA.

Through the first 11 months of the 2019 fiscal year, volume of loans guaranteed under 7(a) totaled $20.9 billion. The 2019 fiscal year is the fifth straight year that 7(a) loan volume has exceeded $20 billion.

The SBA was shuttered between Dec. 18 and Jan. 25 as a result of the 35-day partial government shutdown.

A continuing resolution passed on Thursday funds the government through Nov. 21, so the SBA is subject to a shutdown then unless another budget agreement is reached.