SBA Expands Capital Pilot Program for Underserved Entrepreneurs

On Mar 30, 2022

Vice President Kamala Harris and Administrator Isabella Casillas Guzman, head of the U.S. Small Business Administration (SBA) have announced reforms to the SBA’s Community Advantage (CA) loan program, a key tool for Community Development Financial Institutions (CDFIs), Community Development Companies (CDCs), microlenders and other critical mission-based lending partners, that prioritizes equitable access to capital for low-income borrowers and those from underserved communities.

“America’s mission-driven lenders have been a critical partner to the SBA in getting much-needed financial relief to underserved businesses throughout the COVID pandemic. Scaling the SBA’s Community Advantage pilot program will help us build on that momentum, create a broader distribution network and better ensure the opportunities of our nation’s accelerating recovery are accessible to more entrepreneurs pursuing their American dreams of starting and growing a successful business,” said Administrator Guzman.

Among the reforms for the Community Advantage program, the SBA will:

• Extend the pilot program to September 30, 2024, providing more certainty for the Community Advantage program, which was set to end in September 2022.
• Lift the four-year lender moratorium and enable the SBA to grow this important lender network, opening up a critical capital program to more mission-based lenders across the country.
• Increase the maximum loan size, the new expanded number of lenders will be allowed to access the SBA’s 7(a) government-guaranteed loan program at lending levels up to $350,000, which represent an increase over the current levels of $250,000.
• Remove the restrictions that can keep individuals with criminal backgrounds from accessing the Community Advantage program.
• Simplify underwriting and collateral requirements for borrowers and lenders, including increasing the maximum unsecured loan size from $25,000 to $50,000, removing barriers that disproportionally impact underserved borrowers.
• Introduce additional abilities for lenders to make revolvers and lines of credit, interest-only periods, and other loan modifications that meet borrowers where they are to best serve their capital needs.
• Redefine packaging fee guidelines to better enable CDFIs, CDCs, and mission lenders participating in the Community Advantage program to scale and increase volume to underserved communities.

Designed to meet the credit, management, and technical assistance needs of small businesses in underserved markets, the SBA’s Community Advantage pilot loan program was launched during the Obama-Biden Administration and originally set to expire in September 2022. The program was intended to provide mission-oriented lenders, primarily nonprofit financial intermediaries focused on economic development, access to 7(a) loan guarantees previously for loans of only $250,000 or less. Community Advantage continues to be the best avenue to allow mission-driven lenders to access SBA 7(a) loans. The SBA’s goals for the Community Advantage program include:

• Increasing access to credit for small businesses located in underserved areas;
• Expanding points of access to the SBA 7(a) loan program by allowing participation of non-traditional, mission-oriented lenders; and
• Providing Management and Technical Assistance (M&TA) to small businesses, as needed.

To learn more about Community Advantage and additional small business financial assistance programs, visit your local SBA office at www.sba.gov.

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