WASHINGTON— Ahead of a House Small Business Committee markup scheduled for Thursday to encourage a bipartisan solution to fix issues from recent policy changes to the 7(a) loan program, NAFCU joined with several other financial trade associations in sending a letter to the committee.
The SBA in April issued two final rules. As NAFCU noted, the first changed regulations governing its 7(a) and 504 loan programs related to lending criteria, loan conditions, affiliation standards, and more. The other amended its 7(a) loan program regulations to lift the moratorium on licensing new small business lending companies (SBLCs) and add a new type of entity, called a “Community Advantage SBLC.”
“We support the mission of the 7(a) program to encourage lenders to provide loans to underserved small businesses,” the trades wrote. “However, we remain concerned that SBA’s decision to lift the moratorium on the number of non-Federally regulated lenders in the 7(a) program while simultaneously loosening underwriting standards may negatively impact the performance of 7(a) loans, threaten the integrity of the program, and lead to increased borrower and lender fees.”
Recommendations Made
The groups urged the committee to:
- Implement common-sense parity between the 7(a) loan program and the 504 loan program to better serve borrowers and preserve programmatic integrity for all SBA lending programs
- Reinstate the long-established, prudent underwriting criteria for SBA lending and limit the use of credit scoring only to underwrite smaller loans
- Cap the number of Small Business Lending Companies (SBLCs)
- Provide permanency to the Community Advantage program
Giving ‘Notice’
“We will continue to give voice to the lending industry’s concerns regarding how best to maintain 7(a) loan program integrity. Supporting small businesses, especially those businesses that rely upon SBA-guaranteed financing, is of utmost importance to our national economy and our organizations stand ready to assist in ensuring that access to capital is protected,” the trades concluded.
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