February 13, 2018

By Bob Coleman
Editor, SBA Hot Topic Tuesday

SBA Hot Topic Tuesday — White House FY19 Budget Fully Funds SBA 7(a), 504 Loan Programs, Increases 7(a) Guaranty Fees, Raises SBA Express to $1 Million

The White House’s FY 2019 proposed budget released yesterday supports $30 billion in SBA 7(a) funding. That is a 10% increase over anticipated $27 billion in loans for FY 2018.

Given the Administrator’s newly granted ability to increase 7(a) by 10% if needed at the end of a fiscal year, there should be sufficient 7(a) loan supply to meet 7(a) loan demand. (Oh, and SBA wants that increased to 15% in the budget.)

The SBA 504 loan program is authorized at $8.5 billion for FY 2019, which includes $1 billion in refinancing. Unless SBA loosens its credit box, this will be more than sufficient to meet SBA 504 loan demand.

SBA 504 loan program usage for FY 2017 was a little over $5 billion.

Annualizing the first four months of FY 2018, the 504 loan program is on pace to do a little over $4 billion. 504 lending is down 11% from last year.

SBA 7(a) Fee Increases

In FY 2019, the updated fee structure to offset administrative costs for the 7(a) loan program will include a 0.25 percent increase of the upfront fee on loans over $1 million, and an increase of the annual fee to 0.625 percent on loans over $1 million.

SBA Express Loans to be Raised to $1 Million

The SBA requests an increase in the SBA Express program loan limit from $350,000 to $1,000,000. SBA Express loans have a 50 percent guaranty.

Secondary Market Fee Increase

The SBA requests authority to cover the costs of the 7(a) Secondary Market Guarantee program by introducing in FY 2019 an annual fee not to exceed 0.05 percent per year of the outstanding balance of the pool certificates.

Credit Elsewhere Concerns

The White House is weighing in on the credit elsewhere rule saying:

SBA fills a critical void in the market when economic shocks reduce traditional lending to small businesses and when the private market is unwilling to provide capital to credit-worthy borrowers. However, during prosperous economic times such as these, the Budget proposes that SBA introduce counter-cyclical policies to its business loan guarantee programs that enables it to maintain its operations while ensuring that it is not displacing direct private lending. Through an adjustment of fees across its business loan guarantee programs, SBA would cover both its anticipated lending and operational costs, leveling the playing field among its lender community while operating at zero cost to the taxpayer.

More later to see exactly what this means. . . . . .

White House Fiscal Year 2019 Budget Proposal

SBA 2019 Budget Proposal