The Small Business Administration (SBA) has recently announced the opening of a new application window for Small Business Lending Company (SBLC) licenses, marking the first time in over 40 years that new applicants can apply.
This development presents a significant opportunity for non-depository lenders looking to increase responsible small-business lending and contribute to the growth of the sector.
An SBLC license grants lending organisations the ability to leverage government guarantees when underwriting small business loans. This helps reduce the risk for lenders and lowers costs for borrowers, allowing SBLCs to provide higher volumes of loans to small businesses compared to traditional lending practices. Currently, there are 14 SBLC licenses in the market, but lifting a moratorium on additional licenses through a finalised SBA rule opens the door for new entrants.
During the application window, which runs from June 1, 2023, to July 31, 2023, the SBA will evaluate new SBLC applicants based on a range of criteria. These include the alignment of the proposed SBLC’s lending policies with the SBA’s mission, historical performance measures such as default, purchase, and loss rates, and any legal proceedings or enforcement actions associated with the applicant.
Additionally, the SBA will consider other relevant information, including gaps in small business lending that are not adequately served by existing 7(a) lenders, such as small-dollar lending and loans to underserved populations. Affiliation with previously sanctioned lenders or lender service providers and meeting regulatory requirements regarding capital and fidelity insurance are also important considerations.
New SBLC applicants can find detailed information on the application process by visiting the Federal Register’s website at the provided link [Federal Register – SBLC Application Process]. This step aligns with the SBA’s broader efforts to modernise its loan programs, streamline credit criteria, and reduce administrative burdens for all lenders. Notably, these improvements aim to benefit not only the more than 1,700 depository banks and credit unions that participated in SBA loans during the last fiscal year but also new SBLC applicants seeking to contribute to small business growth.
This expansion of the SBLC program is also in line with the SBA’s commitment to enhancing support for small businesses. In a previous informational notice released on May 1, the SBA outlined steps for Community Advantage Pilot Program lenders to transition to a new type of license known as the Community Advantage SBLC.
New SBLC applicants may find information on how to apply here: https://www.federalregister.gov/documents/2023/05/22/2023-10310/small-business-lending-company-application-process.