The U.S. Small Business Administration this week announced two new initiatives aimed at increasing SBA-backed loans to small businesses in traditionally underserved communities.
The initiatives – Small Loan Advantage and Community Advantage – are to be implemented by March15, 2011. They will expand the number of loans going to small businesses and entrepreneurs in underserved communities under the agency’s popular 7(a) program. Such loans can be used for a variety of general business purposes, including working capital and purchases of equipment and real estate.
“Over the last two years, we’ve seen lending to all small businesses tighten up, and that tightening has been even greater in traditionally underserved communities, including among minorities, women and in rural areas,” SBA Administrator Karen Mills said. She said the Advantage initiatives will allow small business owners to get the capital they need to start or grow their business and create jobs in their local communities.
Built on what the agency refers to as its “Advantage” platform, Small Loan Advantage and Community Advantage will offer a streamlined application process for SBA-guaranteed 7(a) loans up to $250,000. These loans will come with the regular 7(a) government guarantee, 85 percent for loans up to $150,000 and 75 percent for those greater than $150,000.
Small Loan Advantage will be open to the 630 financial institutions in the agency’s Preferred Lender Program, which includes many of the nation’s largest lenders.
Small Loan Advantage loans submitted electronically through the SBA’s e-Tran application process will be approved within minutes, while other applications will be approved within one business day.
Community Advantage, a three-year pilot initiative, will expand the points of access small business owners have for getting loans by opening SBA’s 7(a) loan program to “mission-focused” financial institutions, such as community development financial institutions (CDFIs), certified development companies (CDCs) and SBA-approved non-profit microlending intermediaries. Most Community Advantage loans will be approved within five to 10 days.
Community Advantage lenders will be expected to maintain at least 60 percent of their SBA loan portfolio in underserved markets, including loans to small businesses in or that have more than 50 percent of their workforce residing in low-to-moderate income communities; in Empowerment Zones and Enterprise Communities; in HUBZones (historically underutilized business zones); start-ups (firms in business less than two years); veteran-owned businesses; and those eligible for the Patriot Express loan program (veterans and members of the military community wish to establish or expand small businesses).
The SBA will begin to take applications from mission-focused lenders interested in Community Advantage on or before Feb. 15, with loan applications accepted on or before March 15.
“These two new loan initiatives tackle a couple of factors we know exist when it comes to the challenges small business owners face,” Mills said. “First, to add more incentive for lower-dollar loans in these communities, we are providing a streamlined process for lenders along with the regular 7(a) government guarantee. Second, we are taking steps that will increase the number of places small business owners in underserved communities can go to get loans. And also, with Community Advantage, we are making sure that the additional assistance some borrowers may need through counseling and technical assistance will be available.”
In conjunction with the implementation of the Advantage initiatives, the SBA will end its existing Community Express pilot loan program for underserved populations on April 30.