For the first time in more than 40 years, the federal government, through the Small Business Administration (SBA), have announced the opening of a window for new applications for Small Business Lending Company (SBLC) licenses.

Isabel Casillas Guzmán, administrator of the SBA, said in a press release:

The Biden-Harris Administration recognizes that small businesses are the drivers of our economy and that to participate in the opportunities created by the President’s Investing in America agenda, they need capital.

About the Licenses

An SBLC license allows the lending organization to use government guarantees when underwriting small business loans, thereby reducing the level of risk to the lender and the cost to the borrower.

For its part, the SBA is approving small business lending company licenses to select non-depository lenders seeking to increase requests for responsible capital for these types of businesses.

Given that there are currently 14 SBLC licenses on the market, the SBA notes that organizations holding them are positioned to provide larger volumes of small business loans than would be possible without a government guarantee.

Likewise, Casillas Guzmán alluded to an SBA rule finalized last month that lifted the moratorium on additional licenses.

“SBA will issue up to three new licenses to qualified lenders based on a review of applications received during this application window,” pointed out SBA. 

New applicants can apply between June 1 and July 31, 2023.

The expansion of SBA’s loan programs will help ensure more borrowers can get funded through a broader network of lenders so they can help build a strengthened American economy that innovates, manufactures, and provides the products and services that make our lives better. https://t.co/9nov2R82X8

— Isabel Guzman (@SBAIsabel) June 2, 2023

New Game Rules

The SBA reported that it will evaluate new SBLC applicants based on a variety of criteria, including:

• The lending policies of the proposed SBLC and their alignment with SBA’s mission
• Historical performance measures, such as default, purchase, and loss rate 
• Whether the applicant is subject to any legal proceedings, enforcement action, order or agreement with a regulator or the presence of other related concerns 
• Additional performance data associated with the applicant or its senior managers, along with other relevant information (such as SBA-observed gaps in small business lending not served by the existing 7(a) Lender population, including small-dollar lending and loans to diverse populations)
• Affiliation with lenders or lender service providers previously sanctioned by SBA
• Adequate capital, fidelity insurance, and other regulatory requirements

“This announcement builds on SBA’s modernization of its loan programs, to streamline credit criteria and cut red tape for all lenders, including the over 1,700 depository banks and credit unions that made SBA loans the last fiscal year,” underscored SBA.

The SBA notes that more than 100 non-depository lenders currently participate in SBA's flagship 7(a) loan program under the Community Advantage pilot initiative, but have only temporary status.

To offer permanent status to these lenders, which include many Certified Development Companies and Community Development Financial Institutions (CDFIs), the SBA has promised to broaden its impact in diverse markets.

In addition, the administration notes that these lenders have shown higher rates of lending to small businesses, minority-owned, women, and veterans.

“The expansion of SBA’s loan programs will help ensure more borrowers can get funded through a broader network of lenders so they can help build a strengthened American economy that innovates, manufactures, and provides the products and services that make our lives better,” added Casillas Guzmán. 

Community Advantage pilot lenders can learn how to transition to a permanent Community Advantage SBLC license here.