Memorandum on the Small Business Administration’s Small Business Lending Company Moratorium Rescission and Removal of the Requirement for a Loan Authorization
This document provides an analysis on the final rule issued by the Small Business Administration (SBA), on April 12, 2023, to lift the moratorium on licensing new Small Business Lending Companies (SBLCs) and add a new type of entity called a Community Advantage SBLC. This rule is effective May 12, 2023. Once implemented, this rule SBA will also remove the requirement for a Loan Authorization in the 7(a) and 504 Loan Programs. This rule implements changes and takes into account stakeholder feedback to the proposed rule issued in November 2022. A comprehensive overview of the proposed rule can be found here.
The rule impacts a few key groups: Community Advantage lenders, prospective licensees, and existing 7a providers.
Community Advantage (CA) Lenders: The new “community advantaged” (CA) lender definition will allow all CA lenders to receive SBLCs. This effectively gives them permanent lending authority while the CA pilot currently is set to expire September 30, 2024. CA lenders replace the “mission-based” lenders outlined in the SBA’s proposed rule.
Prospective Licensees: For decades, there have been no new licenses, leaving transfers or acquisitions to attain them. This would allow for approximately 3 new licenses for for-profit (non-mission based) companies. This has been a priority for many non-depository companies working with small businesses, including the “FinTech” community. There will be eager competition for the new licenses, additional guidance is expected on SBLC applications.
Existing 7a Providers: The rule also removes a duplicative paperwork requirement.
Read the full analysis below.