Fintechs could start issuing SBA-backed loans if new rule is approved
The change would allow non-federally regulated lenders to apply for a license to offer 7(a) small business loans
“The problem with the bank network, which has become even more prominent over the past 10 years, is it doesn’t reach the very smallest businesses. That space has been taken over by the Squares and the PayPals and the Intuits”
The White House this week announced plans to introduce a rule lifting a 1982 SBA moratorium on issuing new licenses for Small Business Lending Companies (SBLCs). Its aim is to increase small business lending opportunities, particularly for underserved markets and smaller-dollar borrowers.
The working capital loans of up to $5 million, with repayment periods of seven to 25 years, are among the SBA’s more popular loan programs.
The proposal would not increase the amount of funds available to borrowers through the program. Rather, it would expand eligibility to more lenders, likely widening the overall pool of approved lenders and potentially lowering average loan amounts.
Lifting the moratorium could take up to a year to go into effect after the initial notice. If the rule change is approved, it could be significant for small businesses that have been increasingly turned down by traditional lending channels.