The U.S. Small Business Administration (SBA) has finalized two rules aimed at addressing gaps in access to capital for small business owners in underserved communities, in line with the Biden-Harris Administration’s efforts to grow the economy from the middle out and bottom-up. The rules will make the SBA’s program for nonprofit mission lenders permanent, remove outdated limits on non-depository lender participation, increase opportunities for employee ownership, and modernize credit criteria and underwriting standards to further incentivize a wider distribution network and small-dollar loans.
In 2022, two out of three business owners seeking credit did not receive what they needed. The number of lenders that originated SBA’s 7(a) loans under $50,000 and $150,000 decreased by over 40% and 25%, respectively, over the past five to seven years. U.S. Small Business Administrator Isabella Casillas Guzman stated, “Modernizing and expanding SBA’s 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.”
Patrick Kelley, Associate Administrator for the SBA’s Office of Capital Access, emphasized the importance of providing stable and affordable capital to entrepreneurs from underserved communities.
The SBA’s final rules will address capital access market gaps in underserved communities by modernizing lending criteria and conditions for SBA’s business loan programs and reducing red tape for SBA lenders. This will expand the number of credit-worthy business owners who can access SBA loans, particularly among women, minority, veteran, and rural entrepreneurs. The rules will also expand the number of participating SBA lenders, providing small businesses with more options for meeting their capital needs.
These initiatives have received support from organizations such as the African American Alliance of CDFIs, the National Association of Latino Community Asset Builders, the National Urban League, the Native CDFI Network, Oweesta Corporation, and Prosperity Now. They believe that these reforms will effectively address capital gaps, bolster underserved markets, and promote inclusive economic growth.
The rules will be enacted soon, aiming to help entrepreneurs grow their businesses by addressing capital access market gaps, expanding the number of participating SBA lenders, and utilizing modern technology to make lender oversight and borrower protection stronger and less resource-intensive.
