SBA 7(a) Loan Program: Final Program Evaluation Design
California State University, Long Beach
PPA 696 - Wednesday 4 PM
Presented to: Professor Dr. David C. Powell
October 16, 2013
Final Program Evaluation Design
The Small Business Administration (SBA) administers different loan programs to support small businesses' growth. The agency negotiates with private lenders on behalf of high-risk small businesses and guarantees up to 85% of the principal and interest of the loan. The borrowers can use the loan to finance working capital, invest on assets and pay the business debts. In comparison to other loan program of SBA, 7(a) loan ...view middle of the document...
Small Business Administration determines the size of business by industry type. The annual must be between $ 750,000 to 33.5 million for retail, service and agriculture (504-7a Loan Comparison, 2013). SBA determines the size of business by the number of employees. Number of employees must not exceed range of 100 to 1,000 for wholesale and manufacturing (504-7a Loan Comparison, 2013). The SBA guaranteed $1 billion in fiscal year 2007, $5 billion in fiscal year 2010, and $3.4 billion in fiscal year 2011 (FY 2014 Congressional Budget Justification, 2013). In fiscal year 2011, $19.6 billion 7(a) loan was approved and the 7(a) loan department had $88 millions of budget (FY 2011 Annual Performance Report, 2013).
No small business gets more than $5 million loan under SBA's 7(a) general loan program. The lowest is $50,000 and the highest is $5 million. Small Business Administration works with approved national, regional, community banks and credit union to provide loan to the qualified small businesses. SBA guaranteed loan for flexible underwriting terms, extended loan terms, and low down payment. Loan can be used for acquisition, rehabilitation, fixtures, leasehold improvement, working capital, refinancing debt, seasonal lines of credit and inventory purchase. The agency guaranty 85% of loan up to $150,000 and 75% of loan greater than $150,000 and $5 million is the cap for loan. Through the American Recovery and Reinvestment Act, 2009, the agency guaranty 90% of the loan (DeHaven & Rugy, 2011). In fiscal year 2011, SBA guaranteed over $30 billion in lending support to 60,000 small businesses in top two lending program, 7(a) and 504 (General Small Business Loans, 2013).
Description of SBA
Small Business Administration (SBA) was established in July 30, 1953 in response to the Great Depression and World War II. SBA was initially founded to provide information and expertise to small businesses. Small Business Investment Company (SBIC) program was established under the Investment Company Act of 1958. Under the act, SBA licensed, regulated and helped provide funds for privately owned and operated venture capital firms. SBA specialized in providing long-term debt and equity investment to high-risk small businesses. With the civil rights movement, SBA Created Equal Opportunity Loan (EOL) in 1964 and reduced the requirements to apply for the business loan for the people who were living under poverty level. SBA provide capital to small business all across the United States of America and its territories. SBA Provides free education and information to small business owner in need through 1,800 locations. SBA gives 23% of contracting dollars to small business. SBA plays the role of advocate for the small business in term of policymaking. The agency negotiates with lender to provide low interest rate loan to the small businesses.
SBA has numerous stakeholders but key stakeholders are SBA itself, Small Business Associations...