SBA Announces Major Changes To Expand SBA 7A Loans

sba 7a • May 11, 2023

📌 Pro-tip: Want to track and apply for an SBA 7A loan & get recommended SBA lenders? Apply on the Skip Funding Assistant.

Today the SBA announced major improvements to its flagship lending programs, the SBA 7(a) and 504 programs, to allow more small business owners to get the funding they need to expand and grow their businesses. These improvements should make it significantly easier for borrowers to find lenders, go through the SBA loan processes, and if eligible, get approved for small business loans.

The press release issued by the SBA Administration today confirmed two new rules aimed at closing gaps in capital access for America's small business owners and announced two new plans to help small business owners. In this post, we give a recap of the press release, our take, and what these changes mean for your business.

TL;DR: SBA loan eligibility will be clearer, loan-seekers will have more lender options options, and the application and approval process will be faster, easier and less prone to fraud.

SBA Makes Improvements to SBA 7A Program To Allow Better Loan Accessibility

The major rule changes that go into affect on May 12 were designed to address "persistent capital access gaps". In particular, these rule changes were made to advance equity for rural, veteran, women, and minority-owned businesses.

Rule Change 1: Allowing SBA Lenders to Make Faster and Easier Loan Decisions

The SBA has updated it's lending criteria for 7(a) and 504 loan programs by:

Allowing lenders to make SBA loan decisions based on their existing credit policies for similarly-sized, non-SBA loans
Providing additional flexibility for loans under $150,000 to reduce the cost and complexity of small-dollar lending
Streamlining lender paperwork, enabling them to spend more time with applicants and make loans more efficiently
Simplifying and clarifying affiliation standards to ease the burden on small business owners and lenders, and make clear who qualifies for an SBA loan

What does this mean for you? It will be easier to know who can get approved for loans and lenders will be able to review applications faster.

Rule Change 2: Expanding the Number of Participating SBA Lenders

The SBA will expand the number of lenders who can offer SBA-guaranteed loans, providing small businesses with more options for meeting their capital needs. The number of SBA lenders — Small Business Lending Company (SBLC) licenses — has been capped at 14 for 40 years, limiting potential lending options for small businesses. SBA's rule will:

Lift the moratorium on new SBLCs and allow for additional licensees, enabling new lenders to make loans to small-dollar borrowers with government guarantees, reducing risks and broadening opportunities
Provide certainty through the Community Advantage program, encouraging current and new nonprofit lenders to invest in and expand SBA lending operations
Utilize modern technology to make lender oversight and borrower protection stronger and less resource-intensive than was possible when the SBLC moratorium was put in place

What does this mean for you? Small business owners will have more options when it comes to applying for SBA 7(a) and 504 loans, especially if you're looking for small-dollar loans with government guarantees.

SBA Announces 2 Major Operational Lending Improvements

In addition to the rule changes, the SBA has announced two additional improvements to help small businesses seeking SBA loans.

Operational Change 1: Streamline Eligibility Determination of SBA-Backed Loans

To reduce the burden of SBA lenders and streamline operations, starting August 1, 2023, the SBA will leverage new technology to determine SBA loan eligibility in-house. This will take the burden of approvals off the lenders. This is similar to the Restaurant Revitalization Program where the SBA made approval decisions instead of approved lenders.

Operational Change 2: Add New Fraud Review on All Loans

Also beginning August 1, to address past criticism of fraud, especially in COVID EIDL and PPP programs, the SBA will use advanced data analytics, third party data checks, and artificial intelligence tools for pre-approval fraud reviews on all loans in the 7(a) and 504 loan programs.

What does this mean for you? If the SBA can pull this off, this should make it significantly easier for potential SBA 7(a) and 504 borrowers to go through the loan process and prevent the fraud that was so prevalent during the pandemic.

📌 Interested in learning more? Skip will host a special members-only event on Friday, May 12th to discuss these changes and what it means for you if you're looking for funding — reserve a spot here. Ready to track and apply for an SBA 7A loan & get recommended SBA lenders? Apply on the Skip Funding Assistant.