March 4, 2020
By Caity Witucki
Contributing Editor, C-Suite Wednesday
C-Suite Wednesday — SBA Announces Revisions to Community Advantage Program
On Monday, the SBA issued a notice of the Agency’s intent to revise several policies related to the Community Advantage Pilot Program. The notice announced that the Agency will be changing the requirements for refinancing non-SBA guaranteed same-institution debt and the number of loans a Community Advantage Lender must make before it can begin processing loans under delegated authority. Additionally, the notice provides guidance on the expiration and process for Loan Guaranty Agreements.
Based on comments received in response to a September 2018 Notice, the Agency is modifying the requirements for refinancing non-SBA guaranteed same-institution debt. “SBA has learned that the applicants for refinancing are often small businesses that, for one reason or another, have obtained financing with terms that are onerous and unsustainable for the applicant, such as loans with high compound interest rates, draw fees, late fees, and/or substantial prepayment penalties,” says the notice. “When a Community Advantage Lender receives such an application for refinancing, the Community Advantage Lender may opt to make an interim, non-SBA guaranteed loan to immediately restructure the financing on more reasonable terms, in anticipation of providing a permanent solution.”
In addition to the changes to refinancing non-SBA debt, the SBA is increasing the number of Community Advantage loans that must be initially disbursed before a Community Advantage Lender may receive approval to process applications under delegated authority. The number of loans will increase from seven loans to ten loans.
All changes took effect March 2, 2020 and will remain in effect until the end of the Community Advantage Pilot Program (September 30, 2022). As set forth in the Community Advantage Participant Guide, OCRM will conduct a review of each Community Advantage Lender prior to March 31, 2020. The review will include, but not be limited to, an assessment of the Community Advantage Lender’s compliance with SBA loan program requirements.