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Small Business Administration to expand 7(a) program to fintechs and alternative lenders


The Biden Administration recently announced a slate of new public and private sector initiatives aimed at advancing racial equity by delivering “capital and resources to underserved small businesses and the community lenders who serve them.”  Among these initiatives was a proposed rule change for the Small Business Administration (SBA) that would increase the number of nonbanks, including Fintechs, eligible to offer SBA 7(a) loans. 

This proposed rule change coincides with the 2021 bipartisan legislation “Expanding Access to Credit for Small Business Act” proposed by Senators Tim Scott (R-SC) and John Hickenlooper (D-CO) which similarly sought to allow Fintech and alternative lending companies to participate in the 7(a) program.  The current roster of nonbanks eligible to offer 7(a) loans through the SBA’s $35 billion annual program has been limited to 14 since 1982. 

The SBA’s 7(a) loans are available in a principal amount of up to $5 million and are backed by a 75% to 85% guarantee by the SBA.  These proposed changes to the SBA’s rules will allow nonbank lenders to apply for a license to offer these SBA-backed 7(a) small business loans.  No timetable for the new SBA rules has been set. 

Ballard Spahr’s attorneys are versed in the SBA program requirements and can assist Fintechs and alternative lenders seeking to understand SBA eligibility requirements and create a 7(a) loan program.


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