The Small Business Administration (SBA) will no longer accept new lenders into its Community Advantage loan program, which aims to provide capital to underserved businesses. The program’s existing lenders will be required to expand their capital reserves.
The CA Small Business Lending Company program was introduced in 2011 as a pilot and has since expanded to support women-owned, minority-owned, and veteran-owned small businesses. However, the SBA says the program’s loan portfolio is “disproportionately stressed” due to a seven percent default rate over the past year.
Early problem loans have exceeded 30 percent among some lenders. SBA Administrator Kelly Loeffler has criticized the Biden administration for allowing government programs to tip the scale against deserving small businesses and towards preferred groups.
The program has underwritten $1.1 billion in loans since its introduction, with a record expansion of 143 new lenders approved in 2023. However, this increase in lending led to an unexpected surge in defaults.
The SBA’s decision will tighten the capital environment, which is already facing strain due to the administration’s roll back of underwriting policies.
Source: https://www.inc.com/melissa-angell/sba-hits-the-breaks-on-community-advantage-loan-program-that-helped-underserved-founders/91191666