SBA Halts Lending Under Its Largest Loan Program The Small Business Administration has temporarily shut down its flagship 7(a) loan guarantee program because it was running out of money. The agency said pending loan applications will not be approved and no new applications are being accepted. SBA earlier announced it would cap 7(a) loans at $750,000. The legal limit is $2 million. SBA blamed the freeze in lending on Congress’s failure to pass the agency’s 2004 budget. A continuing resolution provided funding at last year’s levels through Jan. 31, but SBA said a surge in demand for loans has used up practically all the available money. The House has passed an omnibus appropriations bill that includes funding for SBA; the Senate is set to take up the bill shortly after it returns Jan. 20. The National Small Business Association said it understood that the freeze would immediately affect 456 loans that were waiting to be processed. "These moves are the Bush administration's latest attempts to gut this critical program," said Rep. Nydia Velázquez (D-NY), ranking minority member of the House Small Business Committee. In a statement, she said 7(a) loans account for 40% of all small business loans. She said the Bush administration's funding request for the loan program has steadily declined. President Clinton's last budget, in 2001, asked for funding to support $11.5 billion in 7(a) loans; the Bush administration requested $9.3 billion for 2004. Lenders said demand for the loans would exceed $12 billion this year. Until the $750,000 cap was imposed, SBA officials had insisted they had plenty of money to meet loan demand. The agency capped 7(a) loans at $500,000 early in fiscal 2003. That cap stayed in place for five months. At the time, Administrator Hector Barreto said the agency intended to emphasize smaller loans because that is where the need for government-guaranteed credit is greatest.