SBA Administrator Isabella Casillas Guzman this week announced impactful reforms to the agency’s Community Advantage (CA) loan program, a key SBA tool for Community Development Financial Institutions (CDFIs), Community Development Companies (CDCs), microlenders, and other mission-based lending partners. The changes prioritize equitable access to capital for low-income borrowers and those from underserved communities.
WASHINGTON, DC – SBA Administrator Isabella Casillas Guzman at her confirmation hearing before the … [+]
Community Advantage is a pilot SBA loan program designed to meet the credit, management, and technical assistance needs of small businesses in underserved markets. CA provides mission-oriented lenders — primarily nonprofit financial intermediaries focused on economic development — access to 7(a) loan guaranties for loans of $250,000 or less. The lending program’s goals are to increase access to credit for small businesses located in underserved areas; expand points of access to the SBA 7(a) loan program by allowing non-traditional, mission-oriented lenders to participate; provide Management and Technical Assistance (M&TA) to small businesses as needed; and manage portfolio risk.
Among the reforms, the SBA will extend the pilot CA program to Sept. 30, 2024, thereby providing more certainty for the program, which was set to end in September 2022. The program will also lift the four-year lender moratorium and enable the SBA to grow an important lender network, opening a critical capital program to more mission-based lenders across the country.
The reforms will increase the maximum loan size, as the new expanded number of lenders will be allowed to access the SBA’s 7(a) government-guaranteed loan program at lending levels up to $350,000, which is a $100,000 increase over the current level of $250,000. Further, the reforms introduce additional abilities for lenders to make revolvers and lines of credit, interest-only periods, and other loan modifications that meet borrowers where they are to best serve their capital needs.
More positives include simplified underwriting and collateral requirements for borrowers and lenders, including increasing the maximum unsecured loan size from $25,000 to $50,000, thus removing barriers that disproportionally impact underserved borrowers.
Additionally, restrictions that can keep individuals with criminal backgrounds from accessing the Community Advantage program will be eliminated. Lastly, redefined packaging fee guidelines to better enable CDFIs, CDCs, and mission lenders participating in the Community Advantage program to scale and increase volume to underserved communities.
Guzman believes America’s mission-driven lenders have been a critical partner to the SBA in getting financial relief to underserved businesses throughout the COVID pandemic. Updating the Community Advantage pilot program, will help build on that momentum, create a broader distribution network, and better ensure the opportunities of the country’s accelerating recovery are accessible to more entrepreneurs pursuing their dreams of starting and growing a successful business.
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SBA Grants Additional Deferment of Payments on COVID Economic Injury Disaster Loans (EIDL)
On Tuesday, March 15, Guzman announced a major policy change to the SBA’s COVID economic relief portfolio to provide more flexibility to small business owners impacted by the pandemic, especially those in hard-hit sectors. Effective now, the SBA will provide additional deferment of principal and interest payments for existing COVID Economic Injury Disaster Loan (EIDL) program borrowers for a total of 30 months deferment on all approved COVID EIDL loans.
The COVID-19 EIDL federal small business loan program supports small businesses’ recovery from the pandemic’s economic impacts by providing accessible and borrower-friendly capital. While it is important to note that COVID EIDL no longer accepts new applications, it does continue to accept requests for increases, reconsideration, and appeals.
Throughout the COVID-19 era, the SBA enacted relief programs including the Paycheck Protection Program (PPP), the Shuttered Venue Operators Grant program, the Restaurant Revitalization Fund, and COVID EIDL program that have been critical pieces in fueling America’s economic rebound from the pandemic. The COVID EIDL program, alone, has allocated more than $351 billion in relief aid to 3.9 million borrowers, including to the smallest of small businesses from historically underserved, disadvantaged communities.
SBA Support for Women-Owned Business
In honor of Women’s History Month (March 2022), the SBA hosted its 2022 Women’s Business Summit on March 28-30, 2022. The summit consisted of virtual panels, “Ask an Expert” workshops, and fireside chats to help women-owned small businesses build, scale, and grow. The event was co-sponsored by the Nasdaq Entrepreneurial Center, a non-profit that is building a better path for entrepreneurs worldwide through events, education, and mentorship.
I have long maintained that the SBA is among the most effective agencies of the federal government. It powers the American Dream of business ownership. As the go-to resource and voice for small businesses, the agency empowers entrepreneurs and small business owners with the resources and support they need to start, grow or expand their businesses, or recover from declared disasters. It delivers services through an extensive network of SBA field offices and partnerships with public and private organizations and helps expand access to capital for women-owned businesses and under-served groups and areas across the United States.