SBA Hot Topic Tuesday – SBA Proposes to Add Three More SBLC Licenses

November 8, 2022

Delaney Sexton
Contributing Editor

SBA Hot Topic Tuesday – SBA Proposes to Add Three More SBLC Licenses

“SBA has determined that certain markets where there are capital market gaps continue to struggle to obtain financing on non-predatory terms. Therefore, SBA is proposing to lift the moratorium on licensing new Small Business Lending Companies (SBLC) and create a new type of Mission-Based SBLC to help bridge this financing gap,” reads a new proposed rule released on Monday.

A Mission-Based SBLC is a specific type of SBLC that is a nonprofit organization whose purpose is to fill an identified capital market gap. This addition will also allow Community Advantage lenders to apply to permanently participate in the 7(a) program as a Mission-Based SBLC. SBA plans to accept applications for Mission-Based SBLCs from time to time and will publish application periods for new licenses in the Federal Register. Another proposal included is that a CDC may be affiliated with a Mission-Based SBLC.

Mission-Based SBLCs will have the following requirements:

• Must be a non-profit organization
• Must make a certain percentage of the total number of loans in its identified capital market gap, similar to the requirement in the CA Pilot Program. The minimum acceptable percentage of loans made to an identified capital market gap will be individualized based on Mission-Based SBLCs’ target market, risk tolerance, financing needs, and other factors identified in their proposed business plan.
• Must maintain a minimum amount of capital at the discretion of the Administrator in consultation with SBA’s Associate Administrator at the Office of Capital Access

One other change included in the proposal is that the SBA will revise a section to state that an SBLC applicant must show a letter of agreement from an existing SBLC if it is acquiring an existing license.

As of now, if the moratorium lifts the SBA will have the ability to license and supervise three additional SBLCs based on their current oversight capacity. Current CA lenders in good standing will be able to apply and be approved as Mission-Based SBLCs.

They will be receiving comments on this proposed rule up to January 6, 2023. Comment here.

Federal Register – SBA Rule Proposal