August 16, 2023 | Andy Medici, Senior Reporter, The Playbook
SBA unveils several changes to loan programs
Key changes to SBA loan programs
- The SBA now being responsible for determining loan eligibility. Previously, it was on lenders to determine if a business was eligible.
- Collateral no longer required for loans of $50,000 or less — double the previous $25,000 limit. Personal guarantees are still in place.
- Lenders no longer having to analyze both ownership and overall “control” of the business when determining size standards, which could be subjective. Now, it’s only ownership.
- SBA now conducting its own fraud check on every loan, which experts say has grown out of its extensive efforts with the Paycheck Protection Program.
- Lenders previously needed to generate a loan authorization, which the SBA will now do with information already provided on the loan documents.
- Instead of having to include a narrative on why credit was not available elsewhere for the borrower, the lender can now choose from a list of common reasons.
- The SBA will now provide small-business scores on all 7(a) loans under $500,000, except for a few specific loans. Before, the lender had to provide those scores.
- Simplified underwriting for loans of $500,000 or less, raised from the previous $350,000.
- Lenders now being able to use their own financial information verification processes for loans under $500,000 instead of having to obtain tax return transcripts and reconcile that with the application.
- Lenders now being able to use a universal purchase package for all 7(a) loans regardless of size or delivery type, as opposed to having a variety of different purchase packages.
- For loans under $500,000 for new businesses or complete changes of ownership, a 10% equity injection is no longer mandated. Instead, lenders can use their own policies for similar private sector loans. For larger loans that do require 10% equity, lenders can now follow their own policy for verifying that, instead of the SBA requirements.
“I think it’s the best possible option in the market place I really do,” Zaabel said. “A lot of the loans we see out there in the marketplace are one-year loans, so even if the interest rates are not terrible, they are still higher than the SBA, and it’s a one-year repayment term and it’s a huge cash flow issue for small businesses.”