Emphasis on small dollar loans, new technologies, getting back to ‘normal’ business

“While progress has been made, our data also tells a deeper story: historic inequities in accessing capital persist,
and we must do more to lower the barriers of entry to opportunity for all our entrepreneurs.
We will continue to build on our impactful programs to meet small businesses where they are
and connect them with the resources needed to thrive.”

SBA Administrator Isabella Casillas Guzman
NAGGL 2021

 Just a short time ago we used “hybrid” mainly to describe a new breed of cars. Not so any more. Now, we’re into hybrid gatherings for meetings big and small. Attendee’s choice: Go or dial in. This year’s NAGGL was a hybrid. JRB President Alex Liberchuk went in person, and I dialed in.

No matter. As always, NAGGL’s Conference, October 27-29, was a true coming together. Onsite and across the country, we connected with peers, lenders, SBA staff, and federal legislators. Sessions focused on learning from challenges faced during the pandemic, improving SBA’s regular programs including new technologies, where legislation is headed, and importantly, addressing the needs of borrowers with loans under $150,000.

SBA asks for lender feedback on all topics within 60 days. With programs already in development, NOW’S THE TIME!!

Big Focus: Underserved Communities, Small Dollar and Minority Borrowers. Numbers tell the story: While FY-21 saw $36.5 billion in 7(a) loans (excluding PPP), just $17.2 billion went to minority, women- and veteran-owned businesses combined. And Express and Community Advantage lending has been declining for years. As for the recent sharp decline, those PPP funds went to the smallest businesses.

SBA gets it: Small loans take the up the same lender time as large loans, so many lenders shy away. SBA is doing something about that. Targeting loans under $150,000, they’re developing automated processing for these loans, spelling relief for lenders and quicker access to funds for borrowers. Then there’s the Community Navigator Pilot Program, connecting the smallest small businesses and non-profits with assistance through local groups, resource partners and established businesses. Other resource partners include: Score, SBDC, WBC and SBA’s Boots to Business for Veterans. You also can share this and additional information about the Program and these resources with your borrowers.

Technology: In a Word, Modernization. SBA is streamlining processes and using a team approach to new technology across the board. ETA for most: BootsFY-22, Q1 and Q2. Some in the works: expanded FTA partnership to all SBA departments/new and updated accounting and process methods; SOP 50 10 6 updates, and updated Forms 1919/1920 and 519. SBA also is creating its first-ever File Review System to replace outside contractors. To date, there’s a Loan Review Tool for 7(a). In the hopper: enhancing it for all programs. Watch for a steady stream of new and enhanced automation!

Life After PPP. Getting Back to “Normal.” SBA’s goal: Better than Before! And best summed up in the Agency’s primary objectives:

  • Technology Advancement to enhance the customer experience;
  • Data Accessibility (SBA and Public) to the improve underwriting processes;
  • Alternative source for Tax Transcripts;
  • Electronic signatures and secure communications;
  • Alternative Rate index/retire LIBOR;
  • Leverage, improve and manage Revolving SBA Credit products (SBA Express, CAP Lines, EWCP, Export Express)

Like many lenders, NAGGL attendees were loaded with “What’s Next?” questions. Quick Snapshot of a few:

  • Would SBA consider reverting to prior policy requiring lenders to verify any required equity injection ONLY IF the lender would do so for its similar conventional loans?
  • Does SBA plan on providing additional guidance regarding determining when there is excess liquidity for purposes of meeting the Credit Elsewhere Test?
  • Does SBA intend to publish guidance regarding underwriting SBA Express loans in amounts over $350,000 up to $500,000?
  • Does SBA intend to publish additional guidance on underwriting 7(a) loans now, [due to COVID] when many applicants’ recent financial performance makes businesses appear to lack creditworthiness?

No doubt, you’re already thinking of many more! Stay tuned for SBA’s program rollouts. And as always, we’re here to assist you. Contact JRB.

Lisa Lerner
Senior Associate