By Karen Axelton
The Small Business Administration (SBA) has announced it will launch two new loan offerings on March 15. Dubbed the Advantage loan program, the loans aim to better help underserved communities.
The Small Loan Advantage and Community Advantage programs will offer a streamlined application process for SBA-guaranteed 7(a) loans up to $250,000. These loans will come with the regular 7(a) government guarantee, 85 percent for loans up to $150,000 and 75 percent for those greater than $150,000.
Community Advantage loans target underserved markets, including companies under 2 years old, those in low- to moderate-income communities and veteran-owned small businesses. The loans will be made by nonprofit lenders that until now have not been allowed to make SBA-guaranteed loans. These include Community Development Financial Institutions, Certified Development Companies and nonprofit microlending intermediaries.
The Small Loan Advantage loans will be made by larger, existing SBA lenders, and have fewer restrictions than Community Advantage as to who can receive the loans.
“Over the last two years, we’ve seen lending to all small businesses tighten up, and that tightening has been even greater in traditionally underserved communities, including among minorities, women and in rural areas,” SBA Administrator Karen Mills said in announcing the Advantage program. “These new Advantage initiatives are aimed directly at getting more loans into these markets so these small business owners can get the capital they need to start or grow their business and create good paying jobs in local communities across the country.”
Banks and lenders are often reluctant to make small loans because they are less profitable. The SBA is hoping the higher guarantees in both programs will attract more lenders and convince them to make more loans. The existing Community Express program (which will be phased out April 30) only guaranteed 50 percent of loans.
“These two new loan initiatives tackle a couple of factors we know exist when it comes to the challenges small business owners face,” Mills said. “First, to add more incentive for lower-dollar loans in these communities, we are providing a streamlined process for lenders along with the regular 7(a) government guarantee. Second, we are taking steps that will increase the number of places small business owners in underserved communities can go to get loans. And also, with Community Advantage, we are making sure that the additional assistance some borrowers may need through counseling and technical assistance will be available.”
You can find out more about both programs on the SBA’s website.