Private Money Lenders Poised to Fund SBA Loans in Limbo

[Corey Dutton]

Should Congress fail to raise the lending limit on the SBA’s 7(a) loans, the program will be out of money in August. Since no more loans could be backed by the program again until October 1st when the new fiscal year starts, this represents an opportunity for private money, non-bank lenders to fund these loans in limbo.

But why does the lending limit on these types of SBA loans need to be raised? The annual volume of the SBA 7(a) loans has increased year over year for the past 3 years and is expected to break a record in annual volume for 2015. The pending Bill would increase the lending limit of this program from $18.75 billion to $23.5 billion. The good news is that raising the lending limit doesn’t cost the Federal government more money, since the cost is covered by the fees paid by the borrowers.

Should Congress fail to raise the lending limit in time, many of the loans destined for SBA 7(a) funding will have to pivot over to private money lenders for funding. These include all types of non-bank sources of financing such as hedge funds, hard money loan brokers, and other private money lending groups.

Everyone is on pins and needles waiting to see if Congress will be able to pull off a miracle, particularly the borrowers of the 7(a) loans who are mostly start-ups and existing small businesses that use these loans for general business purposes. But with lawmakers going on recess in August, will they be able to pull it off in time?

(Source: American Banker: http://www.americanbanker.com/news/community-banking/congress-races-to-reopen-sba-7a-loan-program-1075660-1.html )

Posted by Corey Curwick Dutton, Private Money Lender