The Small Business Administration is starting two new programs intended to increase small loan lending. Image: Flickr / MoneyBlogNewz / CC-BY
On Feb. 15, the Small Business Administration will be expanding lending programs. Small Loan Advantage and Community Advantage are both programs aimed at increasing lending to very small businesses. Both programs increase the percentage of the loan the government will guarantee.
SBA’s Small Loan Advantage program
The Small Business Administration is a government-supported program intended to help small businesses grow and expand. Many small businesses that have been asking for less than $250,000, however, have had trouble finding banks willing to lend to them. The amount of time, money and effort it takes to underwrite an SBA loan doesn’t feel “worth it” for banks to lend to small businesses. The Small Loan Advantage program will guarantee 75 percent of loans up to $150,000 and 85 percent of loans between $150,001 and $250,000. The hope is that these guarantees will encourage large banks to make small loans to businesses.
Community Advantage through the SBA
The SBA 7(a) Community Advantage program is aimed at increasing the number of lenders that serve minority and underserved groups. The program will certify “mission-focused community institutions” as SBA lenders. The goal of this new program is to create new lending institutions that are not traditional banks. Groups in Texas, Louisiana and other traditionally under-lent groups are targeted. The SBA will start accepting applications for these “community institutions” on Feb. 15.
The basics of SBA lending
SBA lending, through the traditional program, Small Loan Advantage or Community Advantage, is a facet of traditional lending. Banks underwrite the loans and distribute the loans the same way they would traditional loans. The difference is that the federal government backs these loans, meaning that they can be as easy as bad credit loans or no fax payday loans for some businesses.
