On August 1, 2023, new SBA rule changes to streamline the SBA 7A loan process went into effect. For many small business owners, this will make the SBA 7A loan process easier and faster, and can even help early stage businesses. Here's a summary of the changes and what to consider if you're thinking about an SBA 7A loan.
📌 Want more SBA 7A details? Learn more here and get access to SBA 7A lenders directly.
SBA 7A Lenders Can Make Decisions Faster
There are a couple of main policy changes that went into effect on August 1, 2023 that will be helpful for future SBA borrowers.
First, if you're an SBA lender looking to approve a loan up to $500,000, you can now use your own underwriting criteria to make a loan approval decision. That means lenders can use their existing approval process instead of having to use the SBA's lending criteria. This will typically make approvals faster and less bureaucratic.
Secondly, the SBA is issuing 3 new lender licenses, likely to fintech companies, in an effort to increase the options small business owners have when seeking funding. More options means more competition which typically mean better outcomes for small business owners and entrepreneurs.
Total SBA 7A Funding Disbursements Should Increase
Every year, the SBA is authorized to approve $34 billion in SBA loans. However, in 2022 they only approved $26 billion. That means $8 billion was left on the table, likely due to business owners just not being able to complete the requirements or being intimated by the SBA 7A process.
These policy changes should increase the number of business owners that both choose to apply for SBA loans, and increase the number of business owners that are ultimately approved.
For example, in some cases SBA 7a lenders may be able to look at business revenue forecasts to make certain approvals, as opposed to more rigid requirements solely relying on past performance.
These SBA 7A Chances Do Have Criticisms
These changes have had a couple of criticisms that are worth noting. Lawmakers and existing lenders have pushed back and said these changes simply weren't necessary. The current process was fine and has worked for decades.
In addition, there has been concern that by making it easier to get SBA loans, more unfit businesses or risky businesses will be approved. As a result there could be an increase in SBA loan defaults, ultimately putting burden on US taxpayers.
The SBA has responded and said there's no risk of an increased level of default.
📌 Want more SBA 7A details? Learn more here and get access to SBA 7A lenders directly.