The President’s Budget Request for FY2027 was released on Friday last week, and includes several proposals that will impact the 7(a) Loan Program. 

Before we dive in with greater detail below, including NAGGL’s responses and positions to each proposal, here are the quick top-line facts from President Trump’s budget request:

  • 7(a) Authorization Cap: $40 billion
  • 7(a) Subsidy: Zero
  • Secondary Market Guaranty Program (SMGP) Authorization Cap: $15 billion
  • SMGP Subsidy: Zero
  • Legislative Proposal: SBA proposes to Congress that it pass legislative language that would allow SBA to charge a new fee on 7(a) lenders sufficient to cover the costs of SBA’s $158 million in administrative expenses related to all the business loan programs administered by the Agency. While the new fee is called a lender fee, the budget language is unclear regarding how it would be collected.

Remember! The President’s Budget Request is a request sent to Congress for its consideration of the Administration’s priorities. Congress writes and passes the federal government’s appropriation package each FY—which is not always fully consistent with the budget request. The final Congressional funding package includes authorization caps and any legislative proposals related to fee increases. The subsidy rate calculation is determined by the Administration and does not depend on Congress.

BUDGET DETAILS:

7(a) Authorization Cap:

The budget request asks Congress for a $40 billion authorization cap for the 7(a) Loan Program, which would be more than sufficient for expected volume. FY25 saw over $37 billion in gross lending, and FY26 YTD stands at $14.6 billion in gross lending volume, with expectations that FY26 could likely result in $28-33 billion in gross volume, depending on several factors.

  • NAGGL supports the FY27 proposed authorization cap, and thanks SBA for the increased cap to allow for continued program growth.

7(a) Subsidy:

The budget states that the subsidy rate for the 7(a) Loan Program will be zero for FY27, which is a statement from the Administration (not a request like the rest of the budget). This means that the fees that will be collected from borrowers and lenders in FY27

are estimated to cover the costs of loans made in FY27 over the lifetime of those loans, and that the 7(a) Loan Program does not require any taxpayer dollars. In years where there is a positive subsidy, rather than a zero subsidy, in order to keep the program operating lenders and borrowers are typically asked to pay increased fees to cover the estimated higher costs of loans or Congress must appropriate taxpayer dollars.

  • NAGGL supports the FY27 zero subsidy calculation, and thanks SBA for the continued support to ensure sound underwriting policies, which in turn, support strong performance and a zero subsidy program.

SMGP Authorization Cap and Subsidy:

The budget request asks Congress for a $15 billion authorization cap for the SMGP, which will be sufficient for expected volume. FY25 saw roughly $11 billion in pooled sales, and expectations are that FY26 will not exceed FY25 levels.  In addition, given that the SMGP is a separate program from the 7(a) Loan Program, the SMGP also has its own subsidy rate.  The subsidy rate for the SMGP is zero, meaning there is no need for any additional fees on secondary market users to cover the costs of SMGP and the SMGP does not require any taxpayer dollars.

  • NAGGL supports the FY27 proposed SMGP authorization cap, and thanks SBA for the continued support for SMGP activity.

Legislative Proposal to Create Lender Fee to Pay for Administrative Costs of All SBA Loan Programs:

This new fee would allow SBA to collect $158 million from 7(a) lenders to cover the costs of SBA’s administrative expenses related to all the business loan programs.

  • NAGGL opposes this fee because it will restrict access to capital for borrowers given the increase in costs for participants, and encourages Congress not to include this proposal in final appropriations language for FY27.  NAGGL will be continuing to dialogue with SBA to gain greater clarity on how the Agency intends the fee to be administered.