SBA Expands Pilot Program Targeting Access to Capital for Underserved Entrepreneurs

SBA Administrator Isabella Casillas Guzman and Vice President Kamala Harris recently announced the expansion of a pilot program aimed at improving access to capital for underserved entrepreneurs.

The changes come in the form of reforms to the SBA’s Community Advantage (CA) loan program, an SBA tool for Community Development Financial Institutions (CDFIs), Community Development Companies (CDCs), microlenders, and other lending partners. The program prioritizes equitable access to capital for low-income borrowers and those from underserved communities.

"America’s mission-driven lenders have been a critical partner to the SBA in getting much-needed financial relief to underserved businesses throughout the COVID pandemic,’ said SBA Administrator Guzman. "Scaling the SBA’s Community Advantage pilot program will help us build on that momentum, create a broader distribution network, and better ensure the opportunities of our nation’s accelerating recovery are accessible to more entrepreneurs pursuing their American dreams of starting and growing a successful business."

SBA Administrator Isabella Casillas Guzman

The SBA has extended the pilot program to September 30, 2024, which it says provides more certainty for the program, as it was previously set to expire this year. They are also lifting a four-year lender moratorium, enabling the SBA to grow the lender network, which it says opens up a critical capital program to more mission-based lenders across the country.

The SBA is also increasing the maximum loan size. An expanded number of lenders will be able to access the SBA’s 7(a) government-guaranteed loan program at lending levels up to $350,000. This was previously $250,000.

The SBA is simplifying underwriting and collateral requirements for borrowers and lenders, including increasing the maximum unsecured loan size from $25,000 to $50,000, removing barriers that disproportionately impact underserved borrowers. Restrictions are also being removed that kept individuals with criminal backgrounds from accessing the Community Advantage program.

Additionally, the reforms will introduce additional abilities for lenders to make revolvers and lines of credit, interest-only periods, and other loan modifications that "meet borrowers where they are to best serve their capital needs." They will also redefine packaging fee guidelines to better enable CDFIs, CDCs, and mission lenders participating in the Community Advantage program to scale and increase volume to underserved communities.

The Community Advantage Pilot Program was originally launched in 2011. The new extension will ensure that it is around for at least two more years.