Increase 7(a) SBA Cap to $10 Million?

September 16, 2024

by a searcher from University of Texas at Dallas in Dallas, TX, USA

So I somehow landed on diamondfs.com and they mentioned this. What do you all think? haha, I am just wondering the implications it would have for searchers, PE firms etc. Also whether most searchers could afford $5mil+ and have the risk appetite to go that big. It would certainly change the dynamic for many buyers!

"Here is the action item we need everyone to help with $5 Million Doesn’t Buy what it Used To! Petition Increase 7(a) SBA Cap to $10 Million! (ipetitions.com) Please help us gain the support of all brokers, lenders, service providers, buyers and sellers everywhere.
Together we can make this happen."

"Five million dollars does not buy what it did in 2010, which was when the SBA last increased the maximum 7a loan amount from $2 million to the still current $5 million cap. Based solely off typical cost of living increases, assuming 3% per year, $5MM buys approximately 42% less than it did in 2010."
https://www.ipetitions.com/petition/5-million-sba-cap-doesnt-buy-what-it-used-to

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I totally agree that the current limit is too low. It has not been adjusted up for many years. Also, the average size of a small business has increased exponentially as well. The challenge, as Jeff pointed out above, is that many in Congress do not understand that the SBA has historically brought in more in guarantee fees then they have ever paid out. I often argue that the SBA lending programs are probably some of the few profit centers for the Federal Government. However, because of the guarantee exposure that exists, to increase the guarantee limit means Congress needs to increase the dollars backing the SBA loan program, which means additional spending. Even though the money does not get spent if the losses never incur, the government has to budget the money as if they would incur. I think increasing any spending is a hard lift right now. Unless it is already in the budget for the next fiscal year, it is probably going to be hard to get done, in my opinion, but that should not stop us from trying. Everyone interested in SBA funding should sign the petition to increase it.

Reply by an intermediary
from Clemson University in Raleigh, NC, USA

The guarantee cap that Steve (Diamond Financial) and I have proposed is getting traction in congress and with the SBA. While $10 million is completely justified, there are some on one side of the aisle that do not support the SBA at all. The most current discussions have been around correcting those that think raising the cap will disadvantage smaller loans. This misunderstanding is based on their not understanding that the SBA is a profit center and that larger loans will generate more revenue to guarantee more smaller loans as well.

I've proposed (but Steve does not feel the same) that the rates on guaranteed amounts over $5 million could be higher, further strengthening the SBA and it's services.

Please sign the petition if you agree that $5M is outdated (just as $2.5M was outdated when it was increased to $5M. On a cost of living basis $10M is close to $5M when last raised.

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