Sen. Chris Coons, D-Delaware, ranking member of the Financial Services and General Government Appropriations subcommittee and member of the Small Business and Entrepreneurship Committee, joined Sens. Marco Rubio, R-Florida, and Ben Cardin, D-Maryland, in sending a bipartisan letter to Department of the Treasury Secretary Steven Mnuchin and Small Business Administration Administrator Jovita Carranza urging the agencies to provide an immediate administrative fix to ensure the continued operation of the 7(a) loan program.
Due to a technical drafting error, the coronavirus relief bill and the Paycheck Protection Program and Health Care Enhancement Act did not create separate authorization levels for the 7(a) program and the Paycheck Protection Program. As a result, the 7(a) program’s fiscal 2020 $30 billion lending authority will be voided until July 1, 2020 once the amount authorized for PPP is committed. That will leave numerous businesses seeking access to capital without access to the 7(a) loan program.
After the Paycheck Protection Program, the second largest small business support in the CARES Act is the $17 billion small business debt relief program, which provides six months of waived payments for all small business borrowers of SBA-backed loans. The debt relief provision, authored by Coons, is available to all 320,000 small businesses who held SBA loans prior to the pandemic relief legislation, as well as those who take out new SBA 7(a), 504, or microloans within six months of the legislation. The benefit allows small businesses to borrow long-term, with the reassurance that the SBA will make the first six payments on their behalf. If the 7(a) program shuts down, the debt relief program will be unavailable to prospective new small business borrowers.
“The 7(a) program provides flexible capital to businesses that cannot obtain credit elsewhere, serving as a lifeline for many small businesses before this crisis and fulfilling a vital role in this economic emergency,” wrote the senators. “The high demand for PPP loans will lead to a swift expenditure of the new funds, given the severity of the crisis and need for small business relief. We urge the agencies to provide an immediate administrative fix to reserve part of the authorized amount for the 7(a) program.”
The full text of the letter is available at bit.ly/2YrCd1E.