Seeking to expand access to capital for America's small business owners, beginning this month, the Small Business Administration (SBA) began implementing additional policies aimed at meeting this goal by modernizing the 7(a) and 504 loan programs.

SBA stated through a press release:

The loan program improvements will increase small businesses’ ability to access funding to start up and grow through a broader network of lenders with streamlined lender procedures. 

New Opportunities 

According to SBA, the new simplified guidelines for lenders are part of three updated Standard Operating Procedures (SOP), including updated origination policies and procedures, lender participation requirements, and 7(a) loan servicing and settlement requirements.

By doing so, SBA provides additional flexibility in the credit criteria for loans of less than $500,000 in order to reach more creditworthy 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,” pointed out the Administration. 

How do they work?

With this set of changes, SBA makes it easier for small businesses and lenders to know who qualifies up front.

SBA will use advanced data analytics and third-party data checks to screen all loan programs for fraud prior to approval.

In addition, reporting requirements for lenders have been simplified, making it easier to work with the agency.

“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,” underscored the SBA.

Administrator @SBAIsabel explains how the @SBAgov is improving access to capital for underserved businesses at #CNBCSmallBiz pic.twitter.com/ybZba0AFEN

— CNBC Events (@cnbcevents) August 2, 2023

Reducing the Barriers

SBA continues to advocate for removing longstanding barriers that diverse entrepreneurs face when trying to access financial support.

“These changes include permanency in SBA lending for mission-driven organizations like Community Development Financial Institutions (CDFIs), 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 (CASBLCs),” noted SBA.

The following 3 SBA SOPs are already in effect:

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.
2. SOP 50 56: Lender participation requirements — Contains the criteria for becoming an SBA Lender.
3. SOP 50 57: 7(a) Loan Servicing and Liquidation — Contains the policies and procedures for 7(a) loan servicing and liquidation.

“The SBA has a robust outreach and education program to assist its stakeholders in accessing such resources. In advance of these program updates, more than 13,500 people attended SBA live training events, and on-demand training for lenders has been viewed over 15,300 times,” stressed the Administration.