SBA Changes Improve Access to Capital for Small Businesses

The U.S. Small Business Administration (SBA) recently announced changes designed to increase access to capital by modernizing SBA’s signature 7(a) and 504 loan programs.

The 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 include 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. 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, 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.? 

The following standard operating procedures took effect on Aug. 1:

• SOP 50 10 7: Lender and Development Company Loan Programs: contains SBA’s policies and procedures governing the 7(a) and 504 loan programs.  
• SOP 50 56: Lender participation requirements: contains the criteria for becoming an SBA Lender.  
• SOP 50 57: 7(a) Loan Servicing and Liquidation: 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.

For more information about SBA’s loan programs, financial assistance, and other services, visit www.sba.gov.