C-Suite Wednesday – Loan Authorization Requirement to be Removed, New SBLC Licenses

April 12, 2023

Delaney Sexton
Contributing Editor

C-Suite Wednesday – Loan Authorization Requirement to be Removed, New SBLC Licenses

During the 7(a) Quarterly Connect Call held by the SBA, it was announced that the final rule for the SBLC Moratorium Recission and Loan Authorization Removal would be published today.

These are important details from the final rule:

“In the interest of reducing duplicative effort and making better use of existing technology and processes, SBA determined it is in the interest of SBA and SBA Lenders to revise the requirement for a Loan Authorization,” reads the final rule.

SBA will continue relying on the Form 750. The Loan Authorization removal will not change the practice of providing specific instructions for documentation of an SBA loan’s terms and conditions. Whenever loans are approved, the SBA will issue a loan number instead of the Authorization.

The moratorium on licensing new SBLCs is also being revised. “SBA believes that increasing the number of nontraditional lenders will result in the expansion of business opportunities and the creation of more jobs in underserved communities,” reads the rule. “Licensing new SBLCs and Community Advantage SBLCs will provide a path for successful CA Lenders to become participants in the 7(a) Loan Program long-term.”

SBA will no longer require that applicants show an existing lender is transferring its authority. New SBLCs will be available to apply to from time to time, but during periods when new SBLC licenses are not being issued, an applicant will have to show a letter of agreement from an existing SBLC if acquiring an existing license.

The new type of SBLC will be called a Community Advantage SBLC. When the SBA authorizes a Community Advantage SBLC License to a CA lender, the lender will be able to make 7(a) loans without an expiration date instead of making loans under a pilot program. Any CA lender will be permitted to hold a Community Advantage SBLC license regardless of its profit or nonprofit structure; however, applicants that were not previously participating in the Community Advantage Pilot Program will be required to have nonprofit status to qualify.

SBA plans to make it clear that SBLCs and Community Advantage SBLCs may participate in other lines of business in addition to 7(a) lending or making loans to Intermediaries.

Unpublished SBLC Moratorium Recission & Removal of Loan Authorization Requirement