Bipartisan plans to direct more investment capital to innovative, high-growth small businesses and to strengthen SBA’s flagship loan program

(Washington, DC) – U.S. Senator Ben Cardin (D-MD), Ranking Member of the U.S. Senate Committee on Small Business & Entrepreneurship, today announced Senate passage of two key small business bills to unlock capital for innovative small businesses with high-growth potential and to strengthen the Small Business Administration’s (SBA) 7(a) loan program.  Both bills now head to President Trump for his signature.

“The small business committees in Congress are working together to produce common sense legislation that will improve SBA programs and help Maryland’s small businesses and entrepreneurs get capital, start innovative businesses, and support jobs in their communities,” said Senator Cardin.

The Small Business Investment Opportunity Act

Senator Cardin introduced The Small Business Investment Opportunity Act to modify SBA’s Small Business Investment Company (SBIC) program and increase the amount of capital SBICs can invest in qualifying small businesses. 

SBICs are privately-owned and managed investment funds that use their own capital – plus funds borrowed with an SBA guaranty – to capitalize small businesses.  Over the past five years, the program has channeled more than $21 billion of capital to 6,400 American small businesses across a variety of industries. 

Under current law, SBA can guarantee up to $150 million of an SBIC with a single investment fund.  The Small Business Investment Opportunity Act increases that cap to $175 million.  The cap was last raised in 2009. 

“SBIC has a proven track record of steering capital to America’s most groundbreaking and promising ventures in Maryland and across the country,” added Senator Cardin.  “Raising this investment level will maximize the amount of funding SBIC can direct to the transformative small businesses that hire Maryland workers, drive innovation, and help our country maintain its competitive edge.”

Since the program launched in 1958, SBIC has:

  • Deployed more than $67 billion of capital;
  • Made more than 166,000 investments in American small businesses; and
  • Licensed more than 2,100 investment funds.

Some of America’s most iconic brands have received investment capital from SBICs, including Apple, Tesla, Whole Foods, Staples, Intel, FedEx, and Costco, among others.

The Small Business 7(a) Lending Oversight Reform Act

SBA’s 7(a) loan program helps entrepreneurs and small businesses access credit to start and grow their businesses through government guaranteed loans made by private-sector lenders.  The maximum loan size is $5 million, the maximum term is 25 years, and the program operates at zero taxpayer subsidy (costs are covered by borrower and lender fees). 

The Small Business 7(a) Lending Oversight Reform Act reforms the 7(a) program to ensure SBA has the financial resources and authority to keep pace with the program’s growth.  From 2012 to 2017, demand for 7(a) loans grew nearly 68 percent.  To meet demand, the program funding level increased from $17.5 billion to $27.5 billion.

“SBA’s 7(a) loan program provides critical financing to Maryland small businesses that may have difficulty getting a commercial bank loan,” said Senator Cardin.  “The changes we made to this loan program will ensure that small businesses won’t be unexpectedly left without affordable access to working capital to meet payroll and buy inventory or equipment.  We also have taken important steps to prevent fraud, improve oversight, and increase efficiency for borrowers.”

The legislation:

  • Creates a streamlined process to prevent a shutdown of the 7(a) program by which SBA can request an increase of the 7(a) lending cap (up to 15 percent and limited to once a year).  Currently, Congress must act legislatively to raise the program level when the lending cap is reached.
  • Strengthens SBA’s Office of Credit Risk Management by outlining in statute the responsibilities of the office and the requirements of its director.
  • Enhances SBA’s lender oversight review process, including increasing the office’s enforcement options.
  • Requires SBA to detail its oversight budget and perform a full risk analysis of the program on an annual basis.
  • Strengthens SBA’s Credit Elsewhere Test by clarifying the factors that must be considered.