Did you know that the U.S. Small Business Administration (SBA) defines a small business as having 500 or fewer employees?
There’s some good news from the SBA for small businesses around access to capital. Recently, the SBA promulgated rules to address persistent gaps in access to capital. Stated differently, there are funding deserts in some communities and with respect to certain entrepreneurs, and this is one way to address those challenges.
The rules become effective May 12, 2023.
First, the SBA is expanding the number of participating lenders offering SBA-guaranteed loans in order to provide small businesses with more options to meet their capital needs.
The SBA also will lift the moratorium on adding new Small Business Lending Companies, also known as SBLCs, and allow for additional licensees. This will reduce risk and broaden opportunities. Additionally, the rule will provide certainty through the permanence of Community Advantage. The SBA created Community Advantage in 2011 to provide loans to underserved markets through mission-oriented lenders focused on economic development. The rule also utilizes modern technology to make oversight and protection stronger and less resource-intensive than before.
Next, the SBA is updating lending criteria for its 7(a) and 504 loan programs. For the first time, lenders will be allowed to make SBA loan decisions based on their existing credit policies for similarly-sized non-SBA loans. There also will be additional flexibility for loans under $150,000. The required lender paperwork has been streamlined, optimizing time and efficiency. Finally, affiliation standards have been simplified and clarified to ease the burden on small business owners and lenders.
The Chair of the Senate Committee on Small Business and Entrepreneurship, Senator Ben Cardin, emphasized a commitment to “filling gaps in capital markets for underserved communities.” He notes these changes will allow the SBA to assist more businesses in these communities.
The attorneys at The Coppola Firm have years of experience working with and for small businesses. Many of us are small business owners ourselves, so we get it. We’re up to date on all matters concerning small business and are here to help.
Please call us at 716.839.9700 or email us at firstname.lastname@example.org with any questions.