Small Business Administration: A Primer on Programs Page: 14 of 24
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Small Business Administration: A Primer on Programs
Table I Summary of Key Features for 7(a) Loan Guarantee Program
Reflects changes made by the Small Business Jobs Act of 2010 (P.L. I I I-240)
7(a) Loan Guarantee
Purpose Fixed assets, working capital, financing of start-ups or to purchase an existing business; some debt
payment allowed, but lender's loan exposure may not be reduced with the Express products. Lines
of credit are offered with the Express programs.
Maximum $5 million.
Maturity 5 to 7 years for working capital, up to 25 years for equipment & real estate. All other loan purposes
would have a maximum term of I 0 years.
Maximum Base rate plus 2-1/4% for maturities under 7 years. Base rate plus 2-3/4% for maturities of 7 years or
Interest Rates longer. Loans of $50,000 or less may add an additional 1% and loans under $25,000 may add an
Guarantee A fee of 0.25% of the guaranteed portion of the loan is charged for loans with maturities of 12
Fees months or less. For loans with maturities over 12 months, the fees are 2% for loans of $ 150,000 or
less; 3% for loans of $ 150,001 to $700,000; 3.5% for loans over $700,000; and 3.5% for the guaranty
portion over $ I million. There is an on-going fee of 0.55%.
Job Creation No job creation requirements.
Source: Table compiled by CRS from data from the Small Business Administration.
Note: In 2009 and 2010, Congress provided $963 million to temporarily eliminate some of the SBA's fees. For
example, the Small Business Jobs Act of 2010 (P.L. I I I-240) provided $510 million to subsidize fees in the SBA's
7(a) and 504/CDC loan guarantee programs from its date of enactment (September 27, 2010) through
December 31, 2010.
Variable-rate loans can be pegged to either the prime rate or the SBA optional peg rate, which is a
weighted average of rates that the federal government pays for loans with maturities similar to the
guaranteed loan. The spread over the prime rate or SBA optional peg rate is negotiable between
the borrower and the lender, but no more than 6%. The adjustment period can be no more than
monthly and cannot change over the life of the loan.
Variations on the 7(a) Program
The 7(a) program has four specialized programs that offer streamlined and expedited loan
procedures for particular groups of borrowers, the SBAExpress program, the Small Loan
Advantage Program, Community Advantage Program, and the Patriot Express Program. Lenders
must be approved by the SBA for participation in these programs. For example, 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). The program is designed to increase the availability of credit to small
businesses by permitting lenders to use their existing documentation and procedures in return for
receiving a reduced SBA guarantee on loans. It provides a 50% loan guarantee on loan amounts
up to $350,000. However, the Small Business Jobs Act of 2010 (P.L. 111-240) temporarily
increased the program's loan limit to $1 million for one year following enactment (until
September 27, 2011). The loan proceeds can be used for the same purposes as the 7(a) program
except participant debt restructuring cannot exceed 50% of the project and may be used for
revolving credit. The loan terms are the same as the 7(a) program, except that the term for a
revolving line of credit cannot exceed seven years.
Congressional Research Service
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Small Business Administration: A Primer on Programs, report, June 22, 2011; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc805667/m1/14/: accessed April 18, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.