As we approach the New Year, the Small Business Administration is taking significant steps to enhance access to capital for small businesses across the United States. In a groundbreaking move, the SBA has granted licenses to four nondepository financial institutions, allowing them to offer federally backed loans. This initiative is part of a broader effort to support underserved communities and entrepreneurs who are eager to start their own businesses.
New lenders join the SBA network
According to reports from American Banker, the newly licensed lenders include: A10 Capital in Boise, Idaho; Cooperative Business Services in Cincinnati; Lafayette Square in Miami and Stonehenge Capital in Baton Rouge, Louisiana.
These organizations will now be able to participate in the SBA’s primary lending program, which is designed to provide crucial financial support to small businesses.
Addressing capital gaps in underserved communities
SBA Administrator Isabel Casillas Guzman emphasized the importance of this initiative in a statement. “For the second time in over 40 years, the Biden-Harris SBA welcomes new lenders with a shared mission of filling capital gaps in underserved communities – the very same communities who are starting businesses at the highest rates in America today,” she said. This statement highlights the SBA’s commitment to ensuring that all entrepreneurs have access to the resources they need to succeed.
The Biden-Harris Administration is focused on providing affordable financing to the growing number of entrepreneurs revitalizing local economies. Guzman congratulated the new licensees, expressing confidence that they will work alongside the SBA to make the dream of business ownership a reality for more individuals.
Reopening of SBLC licenses
This decision follows the SBA’s announcement in August to reopen the application window for new Small Business Lending Company (SBLC) licenses. Leaders from the newly approved institutions have expressed their eagerness to begin offering loans to small businesses in need. A10 Capital CEO Anuj Gupta stated, “Small businesses are the backbone of the U.S. economy, and we are eager to quickly launch operations. We look forward to applying our decades of knowledge, expertise, and experience to provide lending solutions to small businesses nationwide.”
Breaking down barriers to lending
Historically, the SBA had limited the number of nondepository 7(a) lenders to just 14, a restriction that was supported by banks and credit unions. However, in April 2023, the SBA lifted this cap, paving the way for more lenders to participate in the program. This change is expected to significantly increase the availability of loans for small businesses, particularly those in underserved areas.
With an SBLC license, these organizations can utilize the SBA’s 7(a) government guarantee program when underwriting small business loans. This not only reduces the lender’s risk but also lowers costs for borrowers, enabling SBLCs to underwrite more loans than they could without government backing.
The SBA’s recent expansion of its lending network is a promising development for small businesses, especially those in underserved communities. By partnering with new lenders, the SBA is taking crucial steps toward ensuring that all entrepreneurs have access to the capital they need to thrive. As we move into 2025, this initiative could play a vital role in supporting the growth and success of small businesses across the nation.
