The Small Business Administration (SBA) has expanded loan access among entrepreneurs by updating and simplifying its lending policies.
Founded in 1953, the SBA is a critical source of funding for entrepreneurs looking to grow or start their companies: in 2022, the organization provided $25.7 billion in loans for small businesses. But up till now, the administration required lending partners to follow complicated regulations that limited the number of qualifying applicants. Effective August 1, the new rules make it easier for banks to provide SBA loans to small business owners and increase the types of lending institutions that can partner with the organization. Lenders can now use the same criteria they use for other loans to approve SBA applicants, simplifying the process for both entrepreneurs and banks and increasing the potential candidate pool. Through the Community Advantage Small Business Lending Company license, nonprofit lenders can also now distribute these loans.
In addition to expanding access to SBA loans, the updated rules reduce the amount of work lenders must do to validate applications. The policies are also expected to make the approval process cheaper and more streamlined by reducing paperwork and offering clear criteria for qualifying candidates.
The new policies are especially beneficial to underrepresented groups, especially those that have seen historically lower loan approval rates. Han Nguyen, an SBA representative, told Insider that the reforms were “critical to addressing persistent capital access gaps, particularly for rural and minority-owned small businesses.” The administration went on to note that the updated lending practices would help “women, minority entrepreneurs, employees purchasing a portion of a business from its owner(s), and startup small businesses.”
The decision to expand loan access comes amidst an entrepreneurial boom in the U.S. In May, Tom Sullivan, vice president of business policy at the U.S. Chamber of Commerce, revealed that the organization had grown to represent more than three million companies in the U.S., over 90% of which were small businesses. By removing obstacles to funding, the SBA is addressing this surge in demand for loans and encouraging even more entrepreneurs to launch even more projects. Small businesses are crucial to their local economies and were responsible for two-thirds of all new jobs created between 1997 and 2022.