The Small Business Administration has pulled a page from an old playbook and is eliminating fees for its smallest loans.

Acting administrator Jeanne Hulit announced Wednesday on her blog that for its flagship 7(a) and 504 loans of $150,000 or less, the fee will be zero. The fee elimination will be good for all such loans originated as of October 1, the start of the agency’s fiscal year.

Lending Lift

While the dollar amounts are tiny– about $2,500 on the maximum amount–it could mean a lot to the smallest businesses still struggling with a weak recovery and a wan lending environment by sparking more demand.

This spring, the SBA had indicated it would eliminate fees on its key loans in its budget plan for fiscal year 2014, which began Oct. 1. The SBA pulled similar levers to jumpstart lending at the height of the financial crisis in 2009, when it increased guarantees on its loans.

“When you look at the numbers, the most significant credit gap we see is for smaller-dollar loans,” Hulit wrote. Hulit added that the lower-dollar loans would support new startups, entrpreneurs in underserved communities, veterans, women, and minority business owners.

The SBA is eliminating revenue-making fees despite sequestration cuts last winter that slashed 12 percent from the SBA’s 2014 budget. Its budget for the current year is $810 million.

Financial experts have sometimes criticized the SBA for neglecting smaller-dollar value loans. In fact, the SBA has seen the dollar volume of its smaller loans decrease for the past few years.

For fiscal year 2013, the SBA, in its weekly lending report for September 30, 2013, reported about 25,000 7(a) loans of $150,000 or less, with a dollar amount of $1.4 billion, a 12 percent decrease by dollar volume and a 27 percent decline in number from 2010.

Similarly, it reported 823 504 loans valued at $90 million for fiscal year 2013 , a decrease of 24 percent by number and of 22 percent in dollar volume from 2010.

Fees are usually assessed according to the maturity of the loan, and according to the size of the guaranteed portion of the loan. The fee is usually 0.25 percent on the guaranteed portion of any loan with a maturity of one year or less, the SBA says. The fee rises to 2 percent for the guaranteed portion on loans up to $150,000. Lenders usually pay the fee, and pass that amount on to the borrower plus their own origination fees. The highest guarantee for loans of $150,000 is 85%.

The SBA increased the size and guarantee maximum of its 7(a) and 504 loans at the height of the financial crisis in 2009, when its lending fell by about half as banks retrenched.

The SBA’s move, plus its aggressive campaign to get more community banks lending again, led to a rebound and record 7(a) and 504 lending levels starting in 2011 and continuing until the present.