June 12, 2018
By Bob Coleman
Editor, SBA Hot Topic Tuesday
SBA Hot Topic Tuesday — Senate Passes SBA 7(a) Oversight Bill — Heads to White House
- Allows the SBA Administrator to increase SBA 7(a) loan authority by up to 15% to avoid a lending holiday.
- Requires SBA to perform a full risk analysis of the 7(a) loan portfolio annually.
- Gives SBA regulatory authority to fine lenders up to $250,000
- Establishes a Lender Oversight Committee
- Defines credit elsewhere
Note: Wait for official guidance from SBA before adopting this test.
The term ‘credit elsewhere’ means-
- “(1) for the purposes of this Act the availability of credit on reasonable terms and conditions to the individual loan applicant from non-Federal, non-State, or non-local government sources, considering factors associated with conventional lending practices, including-
- “(A) the business industry in which the loan applicant operates;
- “(B) whether the loan applicant is an enterprise that has been in operation for a period of not more than 2 years;
- “(C) the adequacy of the collateral available to secure the requested loan;
- “(D) the loan term necessary to reasonably assure the ability of the loan applicant to repay the debt from the actual or projected cash flow of the business; and
- “(E) any other factor relating to the particular credit application, as documented in detail by the lender, that cannot be overcome except through obtaining a Federal loan guarantee under prudent lending standards; and
The availability of credit on reasonable terms and conditions from non-Federal sources taking into consideration the prevailing rates and terms in the community in or near where the applicant business concern transacts business, or the applicant homeowner resides, for similar purposes and periods of time.”; and
“Access to capital is one of the most significant hurdles that entrepreneurs face as they start and grow,” says Senate Chairman Risch. “A number of programs at SBA provide funding to small businesses they wouldn’t be able to get otherwise. Our job in Congress is to make sure these programs are being operated effectively and with appropriate oversight. The Small Business 7(a) Lending Oversight Reform Act is an example of hard work in a bipartisan and bicameral way to ensure these objectives are met. I’m proud of the work we’ve done on this bill and look forward to hearing stories from small businesses who continue to benefit from the 7(a) program in the long term.”