Senate leaders express concern over SBA 7(a) proposals

Senate Small Business Committee Chairman Benjamin Cardin (D-Md.) and Ranking Member Joni Ernst (R-Iowa) recently wrote to the U.S. Small Business Administration to express concern about SBA’s two proposals to lift the moratorium on the number of nondepository institutions that may make loans under SBA’s Section 7(a) program and to loosen underwriting standards for the program. The 7(a) program is a loan guarantee program designed to encourage lenders to provide loans to small businesses that might not otherwise have access to financing.

“The proposed rules establish broad and sweeping changes that do not reflect congressional input or authorization,” the senators wrote in their letter. “In particular, changes to the current underwriting standards have the potential to make the program vulnerable to predatory lending practices.” The senators asked that SBA instead establish a pilot program that caps the number of new nonbanks in the 7(a) program.

In a December comment letter, the American Bankers Association expressed opposition to the proposals, urging the agency not to lift the moratorium on nonbank 7(a) lenders without ensuring new lenders maintain robust compliance programs and without demonstrating SBA has the staff and resources to supervise new lenders. ABA also recommended that SBA initiate a pilot program to allow a limited number of nonbanks to become 7(a) lenders.