SBA re-opens flagship loan program, seeks more lenders for second time in two years
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The Small Business Administration for the second time in just over a year is letting non-traditional lenders apply for one of its Small Business Lending Co. licenses.
Lenders interested in the SBA’s offerings can apply to become an SBLC, which can make loans of up to $5 million across the country through the agency’s principal 7(a) lending program.
The SBA also is taking applications from lenders seeking to become nonprofit Community Advantage SBLCs, which can lend up to $350,000 but only in specific geographic areas.
The moves come after the SBA in July said it was expanding its Community Advantage SBLC loan maximum to $500,000 for active lenders. It also was launching an application process for lenders to go up to $1 million for these loans — or $2 million for projects related to climate change.
The SBA will accept applications for new SBLCs through Oct. 15. The agency plans to award up to three additional licenses.
Applications for CA SBLCs will be accepted through Dec. 20, with the SBA saying it would award an “indefinite” number of such licenses.
SBA Administrator Isabel Guzman said in a statement: “Whether it’s leveraging the Biden-Harris administration’s tax credits to become more energy-efficient or seeking to start a thriving business in an underserved community, these SBA initiatives will help entrepreneurs and mission-driven lenders continue to drive the historic Small Business boom we’re seeing under this administration.”
The agency’s push to expand the network of lenders for its loan programs, however, has faced pushback.
The SBA selected Funding Circle and two other lenders to receive new SBLC licenses late last year after pushing through rule changes that ended a decades-old moratorium on new lenders in its 7(a) loan program. The purpose of the changes, the SBA said, was to boost lending to small businesses. The agency issued the call for more lenders in June 2023.
The changes came amid opposition in Congress, with a group of senators attempting but failing to pass legislation curbing the SBA’s efforts.
The Funding Circle application award came under scrutiny from a bipartisan group of lawmakers, including Sen. Joni Ernst, R-Iowa, who said adding such financial-technology firms and online lenders threatened the stability of the SBA’s lending programs. Jeanne Shaheen, D-N.H. and chair of the Senate’s Committee on Small Business and Entrepreneurship, also said she was troubled by the SBA’s decision to award the company a lending license.
Funding Circle ultimately voluntarily returned its license to the SBA.
SBA rolls out other changes to loans, programs
The SBA under the Biden administration has been beefing up its loan programs and tweaking its small-business services as part of a wider effort to expand lending to the smallest and most underserved businesses.
The agency in June rolled out its Working Capital Pilot Program for its 7(a) lenders, a program carrying fees, rates and terms intended to give small-business owners more flexibility. The fee structure includes a transaction-based loan for individual projects or orders, and an asset-based loan to access funds against a company’s assets.
Owners can go to the SBA’s website for more information or use the agency’s Lender Match tool to find a lender near them.
The SBA has given the Lender Match tool an improved mobile interface, with designs on owners being able to view all of their matched lenders in one place to help compare different organizations. The enhanced tool also can verify borrowers and screen for fraud in an effort to streamline the lending process. Small businesses not matched to lenders are connected to the SBA’s local network of free advisers.
SBA surety bond guarantees went up in March for the first time since 2013. That means the SBA is now able to guarantee bid, performance, payment and ancillary bonds of up to $9 million for all projects and $14 million for federal contracts — up from $6.5 million and $10 million, respectively.
The SBA also recently revamped and rebranded its existing 7(j) Management and Technical Assistance Program — now called the Empower to Grow program — which offers customized, one-on-one training and consultation to qualifying small-business owners.
All of those actions are separate from a series of changes the SBA rolled out for its disaster-loan program that dramatically boosted loan sizes and extended deferment periods for homeowners and business owners alike.
The SBA has said it’s made substantial progress in boosting lending to underserved groups, according to agency data, having nearly tripled average monthly lending to Black-owned businesses and doubling lending to Latino-owned companies in fiscal 2024 over the same time in fiscal 2020. Average monthly lending to women-owned businesses also has doubled compared to fiscal 2020.
Additionally, the agency last year said it had awarded $169.2 billion in contracts to small businesses in its fiscal 2022, an all-time high. The federal government awarded $8.7 billion more to small-business contractors compared to fiscal 2021 and, at 26.5%, it exceeded the Biden administration’s goal of 23% of federal-contract awards going to small businesses.
The overall number of prime small-business contractors, however, continued to shrink in that time period, with 62,670 in fiscal 2022, down more than 4% from the 65,428 reported in fiscal 2021. While federal-contract spending has been trending upward for years, the number of small businesses receiving prime contract awards has been declining — meaning a larger share of dollars has been going to a smaller pool of businesses. Between fiscal 2010 and fiscal 2021, the number of small businesses receiving government contracts fell from 121,270 to 65,428.
This story appeared originally in The Business Journals on Sept. 11, 2024.
