The U.S. Small Business Administration (SBA) has reinstated lender fees for its 7(a) loan program, reversing a Biden-era policy that the agency said contributed to financial instability and undermined the program’s zero-subsidy requirement. The action was announced Thursday as part of a broader effort to address what the SBA described as “gross financial mismanagement” under the previous administration.
“Since its inception, the SBA’s 7(a) loan program has launched millions of small businesses, driving economic growth and job creation. But the Biden Administration’s actions to undermine the financial integrity of the program now threaten to leave taxpayers on the hook,” said SBA Administrator Kelly Loeffler. “To safeguard taxpayer-backed capital and small business formation, the SBA is taking immediate action to reverse these policies, starting with the restoration of lender fees to protect the future of the program.”
The SBA’s 7(a) loan program, which offers federally guaranteed loans through private lending institutions to qualified small businesses, is required by law to operate at zero cost to taxpayers. This zero-subsidy mandate is maintained through the collection of lender fees. According to the SBA, the elimination of these fees under the Biden Administration, combined with looser underwriting standards, resulted in significant losses.
From 2022 to 2024, the SBA estimates that more than $460 million in lender fees went uncollected due to the fee waiver. At the same time, the agency experienced rising loan defaults and delinquencies, a trend the SBA attributed to new underwriting guidelines such as “Do What You Do” and the inclusion of non-regulated, non-bank lenders in the program. These factors contributed to a projected $397 million negative cash flow in Fiscal Year 2024, marking the first deficit for the 7(a) loan program in over thirteen years.
The SBA cited this financial shortfall as a key reason for the immediate reinstatement of lender fees, which take effect this week for Fiscal Year 2025. The agency emphasized that this move is essential to protect both taxpayers and the long-term viability of the program.
“Waiving lender fees was one of the Biden-era practices that reduced the financial integrity of SBA lending programs at the expense of small businesses and taxpayers,” the SBA stated in its announcement.
The 7(a) loan program serves as the SBA’s primary mechanism for supporting small businesses that cannot access capital through conventional means. The agency said it will unveil additional changes in the coming weeks to reinforce the program’s financial foundation and restore its zero-subsidy status.
By reintroducing lender fees, the SBA aims to curb mounting losses and reaffirm its commitment to sustainable small business support. According to the agency, these steps are critical for ensuring that the program remains a dependable resource for entrepreneurs nationwide.