Underserved entrepreneurs have a tougher time raising funding than non-diverse owners. The inability to secure capital or not having savvy connections make funding tough.
Vice President Kamala Harris and SBA Administrator Isabella Casillas Guzman have announced reforms to the federal agency’s Community Advantage (CA) Pilot Loan Program that could provide more capital and other resources to underserved business owners. The improvements include extending the program length by two years, ending a new lender moratorium. and lifting loan caps for borrowers, per a news release. Harris and Guzman made the announcement at a White House event at Howard University.
Underserved entrepreneurs can include small businesses that customarily have faced hurdles in accessing capital, credit, and other means to grow. They often include firms owned by people of color, women, and led by founders without capital or business resources to start or grow ventures.
The enhancements are made to the U.S. Small Business Administration CA (pilot) program. The agency reports the program is a key Small Business Administration tool for Community Development Financial Institutions (CDFIs), Community Development
Companies (CDCs), microlenders, and other lenders that basically provide fair access to capital for low-income borrowers and those from underserved communities.Guzman commented, “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.”
She added, “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.”
Here are some reforms the SBA reports it will make for the pilot program:
– Extend the pilot program to Sept. 30, 2024, which will boost the pool of participating lenders. The program was set to expire September 2022.
– Lift the new lender moratorium for the CA program, allowing more lenders to join the program and enable SBA to reach more more underserved businesses and offer them loans.
– Boost the maximum loan size. The new expanded number of lenders will now be able to provide borrowers through the SBA’s 7(a) government-guaranteed loan program up to $350,000. That is higher than the current level for those loans up to $250,000.
– Erase restrictions that can keep individuals with criminal backgrounds from accessing the loan program.
– Simplify underwriting and collateral requirements for borrowers and lenders, including raising the maximum unsecured loan size from $25,000 to $50,000. That is intended to delete barriers that disproportionally impact underserved borrowers.
Review an expanded version of the reforms.