The SBA has done a great job in 2015. The SBA has reached its $18.7 billion cap for 2015 on all 7 (a) loans. The SBA does not issue loans it guarantees loans and provides the funding via third-party lenders. The 7 (a) loans has been a great program for minorities including women, latinos and veterans.
In June of 2105, the SBA was seeking assistance from Congress and did not get too far. Now,
it will become harder than ever for the SBA to obtain assistance from Congress entering the holidays and the presidential election.
If the SBA does not obtain additional funding from congress the 7a loan program may have a temporary shutdown. A temporary shutdown on these loan programs will greatly affect many small business owners.
70% to 90% of all small business owners who apply for a business line of credit or a bank loan get declined. Today less banks take the risk on small business owners partly due to the recession and other factors. Banks have not developed business models to cater to business owners to manage a lot of small loans at a scalable manner. Managing a lot of small loans is a big risk for banks. Banks have increasingly turned to the SBA guarantee to help small business owners and reduce their risk factor.
The SBA 7a guarantee loans have helped out not only a lot of small business owners but a lot of minority business owners. Today, more than ever there is a lot of women in business, Afro-Americans, and Hispanic business owners running their own operations.
If the SBA does not obtain assistance from Congress, these businesses will not have the chance to obtain a lower interest rate loan from the 7a program. Small businesses will have to turn to other forms of non-traditional financing which are usually more expensive than the SBA 7a loan.