ABA, Banking Groups Express Opposition to Proposed SBA Direct Lending Program

The American Bankers Association and a coalition of financial trade groups expressed opposition to a proposed Small Business Administration direct lending program that has been included in the Biden administration’s “Build Back Better” legislation. In a letter to congressional leaders today, the groups raised concerns that the proposed program will undermine existing public-private partnership SBA loan programs and potentially limit access to capital to small businesses “due to increased complexity.”

The proposed Build Back Better legislation provides only 90 days to stand up a $2 billion direct lending program, the groups wrote, adding that the complexity of setting up a lending program so quickly will lead to issues that could drive applicants away from any SBA lending program, including the popular 7(a) lending program that many banks and credit unions participate in. “The regulatory safeguards that exist for financial institutions have proven to be a much better shield to fraud and defaults as compared to SBA-run programs,” the trade groups said.

The groups urged Congress to give SBA funds to bolster the already successful 7(a) to ensure more access to capital “without undermining existing relationships between financial institutions and their customers.”

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