The U.S. Small Business Administration (SBA) has reinstated lender fees for its 7(a) loan program, marking a significant turnaround from previous policies that contributed to financial instability and compromised the program’s zero-subsidy requirement. This announcement aligns with the SBA’s broader initiative to rectify what it identified as severe financial mismanagement.
“Since its launch, the SBA’s 7(a) loan program has empowered millions of small businesses, fostering economic growth and job creation. However, recent actions to undermine the program’s financial integrity risked placing the burden on taxpayers,” said an SBA spokesperson. “To safeguard taxpayer-backed funds and promote small business growth, the SBA is taking decisive action, beginning with the restoration of lender fees to secure the program’s future.”
The SBA’s 7(a) loan program, which provides federally guaranteed loans through private lenders to eligible small businesses, is mandated by law to operate at no cost to taxpayers. This zero-subsidy requirement is maintained through collected lender fees. The SBA reported that the cancellation of these fees, combined with relaxed underwriting standards, led to substantial financial losses.
From 2022 to 2024, more than $460 million in lender fees were left uncollected due to the fee waiver. Concurrently, the agency encountered increasing loan defaults and delinquencies, which were attributed to new underwriting guidelines and the inclusion of non-bank lenders in the program. These circumstances resulted in a projected $397 million negative cash flow for Fiscal Year 2024, the first deficit in over thirteen years for the 7(a) loan program.
The SBA highlighted this financial shortfall as a primary factor for the urgent reinstatement of lender fees, which will take effect this week for Fiscal Year 2025. The agency underscored that this action is crucial to safeguard both taxpayers and the program’s long-term sustainability.
“The waiver of lender fees was detrimental to the financial integrity of SBA lending programs, affecting both small businesses and taxpayers,” the SBA stated in its announcement.
The 7(a) loan program represents the SBA’s main avenue for aiding small businesses that struggle to secure capital through traditional methods. The agency plans to reveal further modifications in the coming weeks to strengthen the program’s financial foundation and restore its zero-subsidy status.
By reintroducing lender fees, the SBA intends to mitigate rising losses and reaffirm its commitment to reliable small business support. These actions are essential for ensuring that the program continues to serve as a vital resource for entrepreneurs across the nation.
