Expanding the number of Lenders to increase access to small, affordable loans for millions of small business owners
Today, Administrator Isabella Casillas Guzman, head of the U.S. Small Business Administration (SBA) and the voice for America’s 33.2 million small businesses in President Biden’s Cabinet, opened a window for new applications for Small Business Lending Company (SBLC) licenses for the first time in over 40 years. New applicants may apply between June 1, 2023, and July 31, 2023.
SBA approves Small Business Lending Company Licenses for selected non-depository lenders to increase responsible small business lending. An SBLC license allows the lending organization to utilize government guarantees when underwriting small business loans to reduce the level of risk to the lender and cost to the borrower. As a result, SBLCs are positioned to write higher volumes of loans to small businesses than possible without a government guarantee. There are currently 14 SBLC licenses in the marketplace today. An SBA rule finalized last month lifted the moratorium on additional licenses. SBA will issue up to three new licenses to qualified lenders based on a review of applications received during this application window.
“The Biden-Harris Administration recognizes that small businesses are the drivers of our economy and that to participate in the opportunities created by the President’s Investing in America agenda, they need capital,” said Administrator Guzman. “The expansion of SBA’s loan programs will help ensure more borrowers can get funded through a broader network of lenders so they can help build a strengthened American economy that innovates, manufactures, and provides the products and services that make our lives better.”
New Application Criteria and Considerations for Applicants
SBA will evaluate new SBLC applicants on a range of criteria, which include:
- The lending policies of the proposed SBLC and their alignment with SBA’s mission;
- Historical performance measures, such as default, purchase, and loss rate;
- Whether the applicant is subject to any legal proceedings, enforcement action, order or agreement with a regulator or the presence of other related concerns;
- Additional performance data associated with the applicant or its senior managers, along with other relevant information (such as SBA-observed gaps in small business lending not served by the existing 7(a) Lender population, including small-dollar lending and loans to underserved populations);
- Affiliation with lenders or lender service providers previously sanctioned by SBA;
- Adequate capital, fidelity insurance, and other regulatory requirements.
New SBLC applicants may find information on how to apply here: https://www.federalregister.gov/documents/2023/05/22/2023-10310/small-business-lending-company-application-process.
This announcement builds on SBA’s modernization of its loan programs, to streamline credit criteria and cut red tape for all lenders, including the over 1,700 depository banks and credit unions that made SBA loans the last fiscal year.
The expansion of SBLC also complements SBA’s May 1 informational notice outlining steps for Community Advantage Pilot Program lenders to transition to a new, Community Advantage SBLC license.
Currently, over 100 non-depository lenders participate in SBA’s flagship 7(a) Loan Program under the Community Advantage Pilot Program but only have temporary status. These lenders have shown higher rates of lending to small, minority-owned, women-owned, and veteran-owned businesses. Providing permanent status to these lenders, which include many Certified Development Companies and Community Development Financial Institutions (CDFIs), promises to expand their impact in underserved markets.
Community Advantage Pilot Program lenders may learn how to transition to a permanent, Community Advantage SBLC License here: https://www.sba.gov/document/information-notice-5000-846918-community-advantage-small-business-lending-company.
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About the U.S. Small Business Administration
The U.S. Small Business Administration helps power the American dream of business ownership. As the only go-to resource and voice for small businesses backed by the strength of the federal government, the SBA empowers entrepreneurs and small business owners with the resources and support they need to start, grow, expand their businesses, or recover from a declared disaster. It delivers services through an extensive network of SBA field offices and partnerships with public and private organizations. To learn more, visit www.sba.gov.