SBA Increases 7(a) Loan Limit to $500,000, Increase Footprint, for Select Community Advantage Lenders

December 18, 2024

Delaney Sexton
Contributing Editor

SBA Notice Says that CA SBLCs Loan Ceiling Will Be Increased to $500,000

SBA’s most recent information notice announces that they are entering a process that will allow Community Advantage Small Business Lending Companies to make loans of up to $500,000. The notice also states that CA SBLCs can begin applying to SBA to expand their geographic lending territory next year.

Going into effect at the start of 2025, SBA is raising the 7(a) loan ceiling for Community Advantage SBLCs. The change allows CA SBLCs to lend a maximum of $500,000. The Office of Credit Risk Management will contact qualifying CA SBLCs to confirm the increased loan ceiling. CA SBLCs are not allowed to start making loans greater than $350,000 until they receive confirmation from OCRM.

Currently, SBA allows CA SBLCs to lend only in states and territories that were specified in the lender’s business plan. Lenders with satisfactory performance and are in good standing can apply to SBA to expand their lending authority to geographic areas in which they are not currently authorized.

Starting January 1, 2025, CA SBLCs can request authority to make 7(a) loans outside of their approved lending territory by submitting applications to CAloans@sba.gov.

The applications must include:

  1. A listing of new additional states where the CA SBLC is seeking authorization to make 7(a) loans.
  2. Copy of Board Resolution authorizing the CA SBLC’s proposed new territory.
  3. Board-approved Business Plan addressing the CA SBLC’s proposed operations for lending in this new dollar range or in this new geographic area. The business plan must include the following information:
    • The CA SBLC must provide a narrative addressing the underserved or unmet demand for financial services in the proposed new territories or in the new loan size. The narrative should address how expanded lending will contribute to local economic development, job creation, and improved living standards and what support is available from local communities, businesses, and governments indicating a need for expanded lending services.
    • The CA SBLC’s strategy for entering new markets and support its preparedness to scale operations, including staffing, technology infrastructure, and physical locations. The board-approved business plan should address the CA SBLC’s staffing in the new lending territories, how loan applications will be sourced in these expanded markets, who will conduct site visits if it is determined that a site visit is appropriate, and whether or not the lender has different legal resources in the expanded lending territory.
    • How the CA SBLC will ensure that the expansion will not negatively affect its existing operations and customer service levels. Are there potential synergies between existing and new operations, enhancing overall efficiency and service quality?
  4. Most recent quarterly or annual financial statement if not already supplied to SBA for reporting requirements.
  5. Capital Plan: The CA SBLC’s board is required to determine the CA SBLC’s capital adequacy goals – that is the total amount of capital needed to assure the CA SBLC’s continued financial viability and to provide for any necessary growth. The Board of Directors must establish, adopt, and maintain a formal written Capital Plan pursuant to 13 CFR §120.462(c). The plan must include any interim capital targets that are necessary to achieve the CA SBLC’s capital adequacy goals. Lender must maintain minimum capital amount as published in Loan Program Requirements. The Capital Plan must address the following: (i) management capability; (ii) quality of operating policies, procedures, and internal controls; (iii) quality and quantity of earnings; (iv) asset quality and the adequacy of the allowance for loan losses within the portfolio; (v) sufficiency of liquidity; and (vi) any other risk-oriented activities or conditions that warrant additional capital (e.g., portfolio growth rate).

Questions about the notice can be directed to Nermeen Ghniem, Senior Financial Analyst, Office of Credit Risk Management at CAloans@sba.gov.