The Small Business Administration plans to make it easier and faster for small-business owners to get loans of $350,000 or less.
Starting on July 1, SBA lenders will no longer have to perform analysis of a business owner’s cash-flow or debt service on loan applications for $350,000 or less, as long as the applicant meets the agency’s credit standards. Two years ago, the SBA introduced a new credit scoring model for those smaller loans—formally known as the Small Loan Advantage program—that looks at the credit record of both the business owner and the business itself.
The SBA expects the streamlined rules will reduce loan origination time of these smaller loans by as much as 50 percent and make it easier for minority business owners to borrow funds. A Wall Street Journal analysis earlier this year found that black business owners received just 2.3 percent of all SBA-backed loans in 2013, down from 11 percent in 2008.
But the new rules should help all borrowers seeking smaller loans get through the SBA lending process faster. They "will simplify and streamline the lending process, which will incentivize banks to do more small-dollar loans in order to get more loans into the hands of traditionally underserved entrepreneurs," Maria Contreras-Sweet, the new SBA administrator, told the Journal.
Contreras-Sweet has said in recent interviews that one of her goals for the agency is to streamline SBA lending programs, making it easier for small businesses to access capital, particularly smaller-dollar loans. The agency has been criticized in recent years for slow loan origination process—especially in its disaster-loan programs—and for not doing enough to help Main Street businesses.
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