Small business groups urged Congress to act quickly on President Barack Obama’s proposal to increase the size limits on Small Business Administration loans.

Raising the maximum size of SBA-backed loans beyond the current $2 million limit is needed to “help more small business owners and franchisees grow,” Obama said Oct. 21 during a visit to Metropolitan Archives LLC in Landover.

That business took out a $2 million SBA-backed 504 loan this February, which enabled it to purchase nearly half of the massive warehouse where it stores records for law firms and other clients. Metropolitan Archives would like another loan to buy more warehouse space but can’t tap the 504 program again unless the lending cap is raised.

Owner Joe Incarnato talked with Obama for about 10 minutes. The president told him he wants to shift some of the government’s financial rescue funds from Wall Street to Main Street, Incarnato said. “From my perspective, I couldn’t agree more.”

Metropolitan Archives was selected as the site for Obama’s announcement because it had borrowed the maximum amount allowed through the 504 program and is close to D.C., Incarnato said. The business invited its top clients to the announcement, and arranged to make that day’s deliveries in the morning so all of its workers could get back to the warehouse for the event.

“The production was pretty phenomenal to watch,” Incarnato said. “I was more in awe watching them put the whole thing together.”

SBA lenders and small business groups had been lobbying Congress to raise the size limits on SBA loans even before Obama’s endorsement. The current limits are too low for many small businesses, they contend, and say now is a particularly good time to raise them because that would enable healthy small businesses to expand and create more jobs.

They hope the president’s backing will give Congress a push to enact those changes.

“He was very explicit on what he wants,” said Giovanni Coratolo, vice president of small business policy at the U.S. Chamber of Commerce. “It’s up to Congress to follow through.”

The chamber, which has battled the White House on issues such as global warming and financial regulatory reform, will be the president’s ally on this effort, Coratolo said.

“We’ll do our part to aid him on this,” he said. “We think it’s important.”

Obama proposed raising the size limit on the SBA’s flagship 7(a) limit to $5 million.

For 504 loans, primarily used for real estate, the limit would be raised to $5 million for most types of businesses and to $5.5 million for manufacturers. Those loans, which are made by nonprofit community development corporations, are paired with loans from private-sector lenders.

House, Senate not on same page

Increasing the loan limits would not require any additional funding from the government. In fact, raising the 7(a) loan limit could make the program stronger because larger loans bring in more fees and have a lower default rate than smaller loans.

Despite widespread support for higher loan limits, it’s not clear how quickly Congress will enact these changes. Sen. Mary Landrieu, D-La., introduced legislation a few hours after Obama’s speech that would implement the president’s proposals.

“Coupled with lower-cost capital available to community lenders, these higher loan limits will further spur business growth and aid in our nation’s continued economic recovery,” said Landrieu, who chairs the Senate Small Business and Entrepreneurship Committee.

Earlier that day, however, the House Small Business Committee approved legislation that would raise the 7(a) loan limit to only $3 million. That 186-page bill also would create several potentially controversial new SBA lending programs, including giving the SBA the ability to make direct loans to small businesses during a recession if private-sector lenders won’t make the loan.

Tony Wilkinson, CEO of the National Association of Government Guaranteed Lenders, said Congress should pass Landrieu’s bill first and then work out a complete reauthorization of SBA loan programs.

“The president has asked for this,” he said. “I would hope it would get some attention.”

“We don’t have time to renegotiate everything there is in the whole area of lending and SBA reauthorization,” Coratolo said. “We need to get a very targeted and timely piece of legislation out.”

Stimulus breaks about to expire

SBA lenders also want Congress to extend provisions in the economic stimulus bill that enabled the SBA to raise its guarantee on 7(a) loans to 90 percent and reduce or eliminate fees on its loans. These incentives helped SBA lending recover this year after cratering last fall when credit markets collapsed.

The SBA, however, expects to use up all the stimulus money appropriated for the incentives in late November or early December. That means they will go away unless Congress finds the estimated $479 million needed to renew them through Sept. 30, 2010.

“I would hate for us to take our eye off that ball,” Wilkinson said.