US Small Business Administration Removes “Outdated Limits” on Non-Depository Lenders to Boost Access to Capital

The US Small Business Administration (SBA) has completed rules that aim to improve access to capital for small businesses in underserved communities, according to a statement by the agency. The final rule makes permanent a program for nonprofit lenders, and removes “outdated limits” on non-depository lenders along with other changes to boost more small-dollar loans.

The SBA notes that in 2022, two out of three business owners who sought credit did not receive what they needed. The entities that originated SBA loans  have declined for the past few years – and

in 2022, two out of three business owners who sought credit did not receive what they needed Click to Tweet

The number of lenders that originated SBA’s loans under $50,000 and $150,000 decreased by over 40% and 25%, respectively, for the past five to seven years.

SBA Administrator Isabella Casillas Guzman commented on the rules saying expanding its lending programs will “open new opportunities to our highly entrepreneurial, yet underserved communities that have far too long been denied access to the funding they need to create jobs and grow our economy.”

Guzman added that “equity” has been a top priority during the Biden administration.

SBA’s final rules strive to:

  • Modernize the lending criteria and conditions for SBA’s business loan programs and reduce red tape for SBA lenders, which will expand the number of credit-worthy business owners who can access SBA loans, particularly among underserved communities like women, minorities, veterans, and rural entrepreneurs.
  • Allow lenders to make SBA loan decisions based on their existing credit policies for similarly-sized non-SBA loans;
  • Provide additional flexibility for loans under $150,000 to reduce the cost and complexity of small-dollar lending;
  • Streamlining paperwork required of lenders;
  • Simplify and clarify affiliation standards to ease the burden on small business owners and lenders and make clear who qualifies for an SBA loan.

The rule will also expand the number of Small Business Lending Company (SBLC) licenses, which is said to promote small business lending through non-depository lenders backed by SBA loan guarantees.

The number of SBLC licenses has been capped at 14 for 40 years, limiting potential lending options for small businesses.

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