WASHINGTON—NAFCU, CUNA and several other financial trade associations sent a letter ahead of the Senate Small Business Committee’s markup this week regarding SBA’s rulemakings for its 7(a) loan program, sharing concerns over how loosening underwriting standards could hurt loan performance.
The SBA in April issued two final rules. The first changed regulations governing its 7(a) and 504 loan programs related to lending criteria, loan conditions, affiliation standards, and more. The second 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 trade groups wrote. “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.”
Some Support Offered
The group offered support for the committee advancing the Community Advantage Loan Program Act, which is set for committee markup, stating it would:
- Provide permanency to the piloted Community Advantage program
- Cap the number of SBLCs
- Provide additional guardrails and authority for the Office of Credit Risk Management at SBA to enhance oversight of non-federally regulated 7(a) lenders for which SBA serves as the primary regulator
- Reinstate the SBA Franchise Directory
- Reinstate the loan authorization
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