SBA creates new path to capital
With small-business owners and entrepreneurs in underserved communities continuing to face challenges accessing capital, the U.S. Small Business Administration announced two new initiatives in mid-December aimed at increasing SBA-backed loans in this market.
Catherine L. Hughes, chairperson and founder of Radio One Inc., and a former SBA borrower, was chosen to chair the agency”™s new Advisory Council on Underserved Communities, which will consist of 20 members from across the country. The SBA is accepting nominations for members who can provide a critical link between SBA and small businesses in traditionally underserved communities. It is anticipated those nominated would reflect a variety of key sectors, including business owners, banking and finance, community development, nonprofit and academia. Potential committee member  resumes can be emailed to underservedcouncil@sba.gov.
The two new loan initiatives ”“ Small Loan Advantage and Community Advantage ”“ are 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 variety of general business purposes, including working capital and purchases of equipment and real estate.
In conjunction with the implementation of these two new Advantage loan initiatives by March 15, 2011. the agency will end the existing Community Express pilot loan program on April 30, 2011.
Built on what the agency refers to as its “Advantage” platform, both Small Loan Advantage and Community Advantage 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.
Small Loan Advantage will be available to the 630 financial institutions across the country in the agency”™s Preferred Lender Program (PLP). Under PLP, which includes most of the agency”™s highest volume lenders, SBA delegates the final credit decisions to lenders.
With Community Advantage, the agency will expand the points of access small-business owners have for getting loans by opening SBA”™s 7(a) loan program to “mission-focused” financial institutions, including Community Development Financial Institutions, Certified Development Companies and nonprofit micro-lending intermediaries. Community Advantage will leverage the experience these institutions already have in lending to minority, women-owned and startup companies in economically challenged markets, along with their management and technical assistance expertise, to help make their borrowers successful.
“These two new loan initiatives tackle a couple of factors we know exist when it comes to the challenges small business owners face,” SBA Administrator Karen 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, taking steps to increase the number of places small business owners in underserved communities can go to get loans. With Community Advantage, we are making sure additional assistance some borrowers may need through counseling and technical assistance will be available.”