Joint Letter re: SBA 7(a) Program

Dear Senator Cardin, Senator Paul, Representative Velázquez, and Representative Luetkemeyer:

As the leading organizations representing virtually all of the thousands of lenders participating in the U.S. Small Business Administration (SBA) 7(a) loan program, we write to make you aware of our serious concerns regarding SBA's recently released Proposed Rules: Affiliation and Lending Criteria for the SBA Business Loan Programs, 87 FR 64724 ("Affiliation Proposed Rule") and Small Business Lending Company (SBLC) Moratorium Rescission and Removal of the Requirement for a Loan Authorization, 87 FR 66963 ("SBLC Proposed Rule").

In the SBLC Proposed Rule, SBA proposes to lift the moratorium on the number of non-federally regulated institutions (called Small Business Lending Companies or SBLCs) that can make loans under the 7(a) program and to create a new type of SBLC called "Mission-Based SBLCs." SBA indicates that the purpose for removing the moratorium for all types of SBLCs would be to fill a capital market gap for underserved markets identified by SBA. In the Affiliation Proposed Rule, SBA proposes to loosen or remove the 7(a) program’s requirements for how lenders underwrite loans and how borrowers may use loan funds.

Together, these major regulatory proposals lay out a detrimental shift in the 7(a) lending program. Both propose removal or modification of long-existing prudent lending standards which have ensured programmatic integrity for decades. It is into this framework of significantly loosened lending standards that the SBLC Proposed Rule also intends to open SBA’s flagship 7(a) program to a potentially unlimited number of SBLC lenders, including non-bank financial technology companies, or "FinTechs," that would be regulated solely by SBA. SBA's stated intention for these sweeping changes is to aid traditionally underserved borrowers, a laudable goal which our organizations and our thousands of SBA lending partners fully support. However, we believe that the changes, as proposed, will not actually help minority and underserved communities, and could unintentionally harm the very borrowers that SBA is trying to aid.

While any single component included in these proposed rules could present its own concerns, the combination of these changes gives us great pause and elevates our need to closely coordinate with Congress. We also will raise these concerns with the SBA in the comments we submit in the agency's rulemaking process. Because we recognize that Congress has a vested interest and oversight responsibility in ensuring the integrity of SBA’s cornerstone loan program, we urge Congress to engage quickly.

Download the joint comment letter to read the full text.