by Bob Coleman
Don’t count the Independent Community Bankers Association as fans of the three new SBLC licenses.
Says President and CEO Rebecca Rainey:
“The SBA’s decision to extend new 7(a) Small Business Lending Company licenses risks undermining this vital program and the borrowers who rely on it.
“Community bank participation in the 7(a) program is essential to maximizing access to credit in underserved communities. According to SBA data, 68% of 7(a) loans were to underserved borrowers in fiscal 2022, while one in three were to minority-owned businesses.
“Opening the program to more nonbank lenders risks higher defaults and incidences of fraud, which would drive up fees and make the program more costly and less accessible to borrowers.
“As ICBA has repeatedly told policymakers, SBA rule changes that lift the moratorium on the number of institutions that can lend under the 7(a) program while loosening underwriting standards will undermine the program and unintentionally harm the very borrowers the SBA is trying to aid. As members of Congress have told the SBA, the agency’s new rules establish broad and sweeping changes that do not reflect congressional input or authorization.
“Looking ahead, ICBA and the nation’s community banks urge the SBA to issue no further licenses so it abides by its previous commitment to limit the number of new 7(a) licenses it issues to three. Instead of announcing new 7(a) program lenders while Congress advances legislation to address the SBA’s rule, the agency should focus on maximizing the community bank partnerships that have expanded lending in underserved areas and ensuring safeguards against fraud and abuse are preserved.”