The Biden-Harris Administration on March 30 announced what it called “impactful reforms” to the U.S. Small Business Administration’s (SBA) Community Advantage pilot program. The changes seek to prioritize “equitable access to capital for low-income borrowers and those from underserved communities,” the SBA said. Vice President Kamala Harris and SBA Administrator Isabella Casillas Guzman announced the reforms. Changes announced […]
The Biden-Harris Administration on March 30 announced what it called “impactful reforms” to the U.S. Small Business Administration’s (SBA) Community Advantage pilot program.
The changes seek to prioritize “equitable access to capital for low-income borrowers and those from underserved communities,” the SBA said.
Vice President Kamala Harris and SBA Administrator Isabella Casillas Guzman announced the reforms.
Changes announced
With the changes to the Community Advantage program, the SBA will extend the pilot program to Sept. 30, 2024, providing more certainty for the Community Advantage program, which was set to end this September.
The agency will also lift the four-year lender moratorium and enable the SBA to grow this lender network, opening up a capital program to more mission-based lenders nationwide.
In addition, the SBA will increase the maximum loan size. The new expanded number of lenders will be allowed to access the SBA’s 7(a) government-guaranteed loan program at lending levels up to $350,000, which represent an increase over the current levels of $250,000.
The agency will also remove the restrictions that can keep individuals with criminal backgrounds from accessing the Community Advantage program, the SBA said.
It will also simplify underwriting and collateral requirements for borrowers and lenders, including increasing the maximum unsecured loan size from $25,000 to $50,000, “removing barriers that disproportionally impact underserved borrowers,” the agency said.
The SBA said it also plans to introduce additional abilities for lenders to make revolvers and lines of credit, interest-only periods, and other loan modifications that meet borrowers where they are to best serve their capital needs.
In addition, the agency will redefine packaging-fee guidelines to better enable Community Development Financial Institutions (CDFIs), Community Development Companies (CDCs), and mission lenders participating in the Community Advantage program to “scale and increase volume to underserved communities.”
Program history
The SBA’s Community Advantage pilot loan program was launched during the Obama-Biden Administration and originally set to expire this September.
It is designed to meet the credit, management, and technical-assistance needs of small businesses in underserved markets, the agency said.
The program was intended to provide “mission-oriented” lenders — primarily nonprofit financial intermediaries focused on economic development — access to 7(a) loan guarantees previously for loans of only $250,000 or less.
The SBA’s goals for the Community Advantage program include increasing access to credit for small businesses located in underserved areas; expanding points of access to the SBA 7(a) loan program by allowing participation of non-traditional, mission-oriented lenders; and providing management and technical assistance to small businesses, as needed, the agency said.