May 7, 2014
By Bob Coleman
Editor, Coleman Report
New SBA Administrator Maria Contreras-Sweet is making the rounds to SBA lending trade groups
She told NAGGL attendees in Florida today SBA will radically change its processes to help SBA 7(a) lenders make smaller loans to underserved markets.
“Today, I have a call of action for you: I’m asking you to work with us to get capital into the communities that need it the most. The truth is, we still have work to do in this area. The Department of Commerce looked at loan denial rates for firms with gross receipts of $500,000 or less. They found minority-owned firms were three times more likely to get turned down for a bank loan. For high-sales firms, loan denial rates were twice as high for minority-owned businesses.”
How will SBA help?
“We also continue to make regulatory changes to make your work more efficient. In March, we eliminated a regulation that was hurting more than it was helping. The SBA has thrown out the wealth test. No borrower should be denied a loan for enlisting a wealthy investor to help underwrite their project. We want your customers to attract private capital. They shouldn’t be penalized for bringing good people in. So we’re no longer scrutinizing personal liquidity of every investor before we’ll approve a loan.”
And how will SBA do that?
“Technology can transform SBA lending, so more banks see our products as the profitable tools they are. Innovation can help ensure that you, our most active lenders, feel the benefits always outweigh the costs when making 7a lending decisions.
“Early next year, we will roll out SBA One. I describe it as a lot like Turbo Tax for business lending. It will enable the agency to provide one set of forms, services, and data management to thousands of SBA lending partners. We will use industry-leading electronic signature software to help facilitate loan closings. If you’ve filed your taxes electronically, you’ve used this software. We are preparing to bring this advance to commercial small business lending.
“We’ll create a single portal that’s a one-stop shop for eligibility, underwriting, closing, loan modification, servicing, and purchase. It will automate the upload of documents. It will automate the generation of forms. It will automate credit scoring. And it will automate electronic signatures. SBA One will streamline and simplify our lending process. It will save you hours of processing time and thousands of dollars in processing costs on every 7a loan. Needless to say, we’re excited about SBA One, and we hope you are, too.
And she promises to streamline the process.
“One of my top priorities at the SBA is to make it easier for you to work with us. I believe we’re on the right track. We simplified the process for loans under $350,000. As a result, we tripled lender participation under the Small Loan Advantage Program. We re-engineered CapLines to help small business owners meet their short-term and cyclical working-capital needs. As a result, we tripled our lending under this program. And the SBA has eliminated more than 100 pages of time-consuming paperwork on our lending applications. But this is the 21st century, and I believe the time has come to do more than reduce paperwork. It’s time to get rid of paper. And that’s exactly what we plan to do for the 7a program. The truth of the matter is, the SBA can’t offer truly best-in-class service until we automate our lending process.”
“So here’s my vision: I want to work toward a day when SBA lending is in the DNA of every business bank in America. I want to make it simpler and cheaper to work with us. I want to create a climate in which no loan application is turned down until it is first screened by your risk managers and loan officers as a possible 7a candidate.”
Photo Credit — Maria Contreras-Sweet addresses NADCO — Courtesy of NADCO