SBA Policy Notice - Section 502 of the Recovery Act

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “Recovery Act”) (P.L. 111-5). Section 502 of the Recovery Act authorizes SBA to guarantee up to 90 percent of a 7(a) loan except for SBA Express. SBA Express remains at a 50 percent guaranty. The purpose of this Notice is to announce the implementation of the increased guaranty percentage on eligible 7(a) loans.

The Recovery Act did not change the maximum SBA guaranteed amount which remains at $1,500,000. Therefore, for those loan programs that have a maximum loan amount greater than $500,000 (Standard 7(a), CLP, and PLP), in order for the loan to receive a 90 percent guaranty, the loan amount cannot exceed $1,666,666 ($1,500,000 divided by 90 percent).

For loans greater than $1,666,666, the maximum guaranty will be calculated as follows: $1,500,000 (SBA guaranteed amount) divided by the loan amount rounded down to the second decimal. For example, if the loan amount is $1,680,000, then the guaranty percentage would be $1,500,000 divided by $1,680,000, which equals 89.2857 percent, rounded down to 89.28 percent.

The increased guaranty percentage of up to 90 percent is offered in conjunction with the fee eliminations announced today. These terms will be available until the aggregate dollar amount of 7(a) loans made under this authority exhausts the funds dedicated to that purpose. We currently estimate that program level will be approximately $8.7 billion. Depending on loan volume in the 7(a) program, SBA estimates that the increased guaranty percentage will be available through approximately December 31, 2009.

Questions regarding this Notice should be directed to Gail Hepler, Chief 7(a) Program Branch, at (202) 205-7530 or by email at gail.hepler@sba.gov.