WASHINGTON (3/24/14)--The U.S. Small Business Administration has made changes to its flagship business lending programs, effective April 21, intended to increase eligibility for loans under the 504 Loan Program and the 7(a) Loan Program.
By increasing eligibility the SBA hopes to reinvigorate the guarantee programs. The agency describes the changes as:
Eliminating the personal resource test:
A borrower will no longer be required to obtain a maximum level of personal finance resources for a 7(a) or 504 loan. This will streamline the loan process by eliminating complicated regulations used to determine the amount of collateral required.
Revising the rule on affiliation:
Revising this rule will open access to SBA loans to businesses that, under current rules, would not qualify as a small business under SBA's size standards by virtue of their association with other companies. It also would streamline 504 loan applications and reduce paperwork requirements for 504 and 7(a) loan applications.
Eliminating the nine-month rule for the 504 loan program:
Eliminating the nine-month rule removes a restriction that limits a business to include in its 504 project only expenses incurred nine months prior to submitting the loan application. The new rule would allow inclusion of expenses incurred at any time (e.g., projects put on hold for more than nine months due to a natural disaster).
Increasing accountability of the Certified Development Companies' (CDC) board of directors while eliminating requirements for membership:
Refocusing CDC corporate governance requirements will reinforce the importance of board accountability for CDC oversight for the 504 loan program and set in place measures to strengthen oversight in order to maintain program integrity.
The Credit Union National Association has urged the SBA to provide such flexibility and supports the changes as a step in the right direction to make it easier for credit unions and other participating entities to navigate the SBA loan process.
CUNA also recently contacted the SBA to urge continuation of an SBA 7(a) guaranteed loan program fee waiver into 2015, and promoted increasing the member business lending cap, in a letter to SBA Acting Administrator Marianne Markowitz.
Use the resource links to read more about the SBA final rule.