Legislation Introduced to Include Fintech Lenders in SBA Loan Program
Earlier this month, Senators Tim Scott (R-S.C.) and John Hickenlooper (D-Colo.) introduced legislation—the Expanding Access to Credit for Small Business Act—that would permit fintechs to participate in the Small Business Administration’s (SBA) main loan program. The bipartisan bill would lift a nearly 40-year old suspension on issuing new Small Business Lending Company (SBLC) licenses, which was capped at 14 licenses in 1982.
“Our bipartisan bill will modernize the SBA’s primary loan program to help underserved small businesses grow and thrive,” said Senator Hickenlooper in a press release. “You shouldn’t need a big bank to get an SBA loan.”
“As a former small business owner, I know all too well the barriers to entry that prevent entrepreneurs from opening up shop,” Senator Scott said. “The Expanding Access to Credit for Small Business Act is just one step we can take to ensure minority communities and folks in rural America have just as much access to the American Dream as anyone else.”
The SBLC program allows non-depository lenders, like fintechs, to participate in the SBA’s 7(a) loan program. Fintechs were given direct access to one of the SBA’s lending programs through the Paycheck Protection Program (PPP) during the pandemic, which had many hoping that fintechs would obtain permanent access to the SBA’s 7(a) program.
BankingDive reports that SBA Administrator Isabel Guzman recently signaled a willingness to extend fintech involvement in the agency’s loan programs beyond the PPP. Also, Ryan Metcalf, head of U.S. regulatory affairs at the fintech Funding Circle noted that the legislation would not only serve underbanked communities, but it would provide government relief loans in case of another economic crisis.
“Younger and higher credit risk businesses will gain access to affordable credit; more rural small businesses will have easier access to more lenders; and lenders will be able to offer lower rates and longer terms to small businesses,” Metcalf said. “Ultimately, this would cumulatively lead to a quicker, more equitable economic recovery and expansion for main street.”
Metcalf also said that he anticipates banks to be in favor of the legislation, as it would allow them to purchase loans made in low-income areas, which would help them to fulfill their Community Reinvestment Act needs.
The legislation has also received support from groups including the Electronics Transactions Association, the Innovative Lending Platform Association, and the Bipartisan Policy Center.