Yesterday, the Biden Administration released further details outlining its FY24 President’s Budget Request. While not all data has been released yet, here is what we know so far:

  • Proposal for 7(a) authorization cap: $35 billion (same as the current FY23 level)
  • Zero subsidy estimated for 7(a) loan program
  • Proposal for Secondary Market Guarantee Program authorization cap: $15 billion (same as the current FY23 level)
  • Zero subsidy estimated for Secondary Market Guaranteed Program (SMGP)

Other key components of the President’s Budget Request:

  • Proposal to assess an annual fee up to 5 bps on the outstanding balance of all sales in the Secondary Market Guarantee Program (SMGP), with the fee not permitted to be passed on to the borrower. The purpose of the proposed fee, a carry-over proposal first seen during the Trump Administration, is to support the cost of the secondary market; However, since the SMGP is set to zero subsidy cost again this fiscal year, SBA’s justification remains unclear. This proposal has been ignored by Congress since it was first introduced.
  • Data released included in the budget proposal shows the fees collected from lenders and borrowers continue to exceed the amount necessary to maintain a zero subsidy—in other words, program participants continue to pay too much in fees to cover the projected cost of 7(a) lending in a given Fiscal Year.
  • SBA data shows that the 7(a) Loan Program is far exceeding the targets set for loans to underserved markets—for FY22 data, SBA indicated that the target for underserved markets was 43% of all 7(a) loans, but 68% of all 7(a) loans actually went to underserved markets.
  • SBA data shows that “approximately 68% of 7(a) loans approved in FY 2022 were considered small ($350,000 or less).”  The budget goes on to state that “these small loans generally reach the underserved and start up markets…”
  • There is no discussion of any of the changes in SBA’s Proposed Rules, which many had speculated could be folded into the Administration’s budget request in some way.

Please keep in mind that these proposals are just that—a set of recommendations from the Administration to Congress as the Hill starts the work of drafting the FY24 budget. And given a divided Congress and the political challenges around crafting a budget this year, it has been forecasted that there will be many hurdles to both Chambers agreeing on a final FY24 budget, an issue that NAGGL will be watching closely this process on behalf of its members and will be actively discussing the budget with Congress as they start drafting the FY24 appropriations bills.

Remember to register for NAGGL’s Briefing on the President’s FY24 budget request, a complimentary event for Sustaining Members, Individual Members, and for any attendees from the Washington Insider event.