On December 23, the U.S. Small Business Administration (SBA) unveiled the addition of four new Small Business Lending Companies (SBLCs) to improve access to its crucial 7(a) loan program.
This initiative serves as a lifeline for small businesses seeking funding.
The expansion is especially significant, as it represents the first growth in the number of SBLCs in over 40 years, raising the total from 14 to 20.
New Lenders and Their Missions
The newly authorized lenders—Cooperative Business Services (CBS), A10 Capital, Lafayette Square, and Stonehenge Capital—each possess a unique mission focused on providing financial assistance to communities that have historically struggled to access capital.
With their new licenses, these lenders are set to deliver government-backed loans specifically designed for entrepreneurs in low-income and rural regions.
By obtaining an SBLC license, these non-depository lenders can participate in the SBA’s 7(a) loan program.
This program not only safeguards lenders with government guarantees but also offers small business owners reduced borrowing costs.
The SBA’s decision to issue more licenses highlights its commitment to addressing the persistent challenges confronting small businesses in underserved markets.
Expertise of Newly Licensed SBLCs
Each of the four newly licensed SBLCs brings a distinct area of expertise to the table:
- Cooperative Business Services (CBS), based in Cincinnati, Ohio, is a seasoned Credit Union Service Organization with two decades of experience assisting small businesses.
CBS has so far facilitated over $400 million in loans for women-led businesses and $123 million for enterprises run by veterans.
With its expanded capabilities, CBS intends to strengthen lending efforts within low- and moderate-income communities by leveraging its extensive network of credit unions.
- A10 Capital, located in Boise, Idaho, specializes in commercial real estate financing and has significant experience with pandemic recovery lending programs.
Their primary goals include supporting women, veterans, rural entrepreneurs, and minority business owners, with a particular emphasis on sustainability and renewable energy projects.
Notably, A10 aims to allocate at least half of its loans to these underserved communities.
- Lafayette Square, founded in 2020 as a minority-owned investment platform, focuses on lending to businesses that provide employment opportunities for individuals from low- to moderate-income backgrounds.
This organization has ambitious plans to expand its reach into sectors such as solar energy, recycling, and advanced technologies, prioritizing support for rural and economically disadvantaged areas across the nation.
- Stonehenge Capital, a community development finance enterprise rooted in Baton Rouge, has dedicated 25 years to investing in underserved markets throughout 38 states.
Their strategy includes directing 65% of loan activities toward low-income areas and committing 25-40% to environmentally sustainable initiatives.
Stonehenge continues to champion regions typically overlooked by mainstream financial institutions.
Impact on Small Business Lending
This recent initiative by the SBA is poised to boost lending in areas where entrepreneurs have long grappled with securing affordable financing.
The 7(a) loan program stands out as an essential resource for small businesses, supplying critical funds necessary for operational expenses, expansion projects, and ongoing growth.
Keith Reed, President and CEO of CBS, expressed his enthusiasm upon receiving the SBA SBLC license, viewing it as a significant milestone for their organization.
He affirmed their commitment to community service through solid partnerships with local credit unions, emphasizing that these collaborations will enhance access to vital capital for underserved markets.
Reed believes this empowerment will help entrepreneurs establish, run, and grow businesses that play a crucial role in fostering economic development and strengthening community resilience.
Source: Smallbiztrends