Effective Feb. 15, lenders who participate in the U.S. Small Business Administration's Preferred Lender Program can approve loans through the agency's new Small Loan Advantage program, the federal agency says. At the same time, the agency will begin accepting applications from community-based, mission-focused lenders who are interested in making SBA-guaranteed loans through the new Community Advantage program.
Both the small loan advantage and community advantage programs were announced in December as part of the agency's efforts to increase the number of lower-dollar loans being made to small businesses and entrepreneurs in underserved communities.
"Businesses in underserved communities, including minority and women-owned as well as businesses in rural areas, have been among the hardest hit by the recent economic downturn," says SBA Administrator Karen Mills. "These two new advantage initiatives can provide critical support to help these businesses and entrepreneurs get much needed financing to start and grow, which will translate into more jobs in these communities."
Built on what the agency refers to as its advantage platform, both the Small Loan Advantage and Community Advantage programs offer a streamlined application process for SBA-guaranteed 7(a) loans up to $250,000. Advantage 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.
Also starting Feb. 15, any of the 610 financial institutions across the U.S. in the SBA's Preferred Lender Program can approve loans using the new Small Loan Advantage process. Under that preferred program, which includes most of the agency's highest volume lenders, SBA delegates the final credit decisions to these lenders.
Additionally, SBA has begun accepting applications from financial institutions that are interested in becoming Community Advantage lenders. Through that effort, the agency expects to expand the points of access small business owners have for getting loans by opening SBA's 7(a) loan program to financial institutions, including community development financial institutions, SBA's certified development companies, and SBA's nonprofit micro-lending intermediaries.
Community Advantage will leverage the experience those institutions already have in lending to minority, women-owned, and start-up companies in economically challenged markets, along with their management and technical assistance expertise, to help make their borrowers successful.
SBA says that studies it and U.S. Department of Commerce have studies conducted have shown the importance of lower-dollar loans to small business formation and growth in underserved communities.
With that in mind, the two new loan initiativesSmall Loan Advantage and Community Advantageare aimed at increasing the number of lower-dollar SBA 7(a) loans going to small businesses and entrepreneurs in underserved communities.
The agency's most popular loan product, 7(a) government-guaranteed loans can be used for a variety of general business purposes, including working capital and purchases of equipment and real estate.
Community-based organizations interested in becoming Community Advantage lenders should contact the closest SBA district office.
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