Lending program improvements expand access to capital for small businesses and increases protection against fraud
On August 1, the U.S. Small Business Administration (SBA) began implementing additional policies aimed at expanding small business access to capital by modernizing SBA’s signature 7(a) and 504 Loan Programs. Today’s loan program updates build on Administrator Isabella Casillas Guzman’s previous announcements that address long-standing persistent capital access gaps for rural, veteran, women, and minority-owned businesses.
The loan program improvements will increase small businesses’ ability to access funding to start up and grow through a broader network of lenders with streamlined lender procedures. The new, simplified guidelines for lenders are part of three updated Standard Operating Procedures (SOP), including updated origination policies and procedures, lender participation requirements, and 7(a) loan servicing and liquidation requirements. For example, SBA is providing additional flexibility in credit criteria for loans under $500,000 to support SBA loans in reaching more credit-worthy small businesses.
SBA made it easier to understand who qualifies for an SBA loan by clarifying affiliation standards, which can determine which businesses count as “small,” and is now bringing eligibility determination in-house through technology upgrades. Together, these changes will help small businesses and lenders know who qualifies up-front. SBA will use advanced data analytics and third-party data checks for fraud review on all loan programs before approval.
SBA also streamlined information requirements for lenders, making it easier to work with SBA. For example, SBA no longer requires duplicative data entry in the Loan Authorization Wizard and instead will use information already entered into the system to produce a Terms and Conditions Sheet electronically.
SBA recognizes that small businesses, particularly those owned by individuals in underserved communities who are highly entrepreneurial, still face long-standing barriers in accessing capital needed to start or grow their businesses. These changes include permanency in SBA lending for mission-driven organizations like Community Development Financial Institutions (CDFIs), which have a track record of filling capital gaps in underserved communities but were previously participating in SBA lending through a temporary pilot program called Community Advantage. These lenders are securing permanency in the 7(a) Loan Program by becoming Community Advantage Small Business Lending Companies (CASBLCs).
The following three SBA SOPs take effect on August. 1, bringing many of the new policies into practice:
Contains SBA’s policies and procedures governing the 7(a) and 504 loan programs.
Contains the criteria for becoming an SBA Lender.
Contains the policies and procedures for 7(a) loan servicing and liquidation.
A new feature SBA will begin accepting is the Universal Purchase Package (UPP), which will streamline the process for lenders to request SBA honor its loan guaranty, and SBA will introduce new features in E-TRAN, SBA’s online platform used by lenders to upload loan applications.
The SBA has a robust outreach and education program to assist its stakeholders in accessing such resources. In advance of these program updates, more than 13,500 people attended SBA live training events, and on-demand training for lenders has been viewed over 15,300 times.
For more information about SBA’s loan programs, financial assistance, and other services, visit www.sba.gov.