SBA Extends Lending Licenses To More Nondepository Financial Institutions To Allow More Federally Backed Loans

The SBA is now allowing four nondepository financial institutions around the country to offer federally backed loans.

The Small Business Administration is extending pathways for small businesses to secure federally backed loans.

Just in time for the New Year, the SBA has issued four new licenses to small business lending companies that allow more nondepository financial institutions to provide federally backed loans, American Banker reports. A10 Capital in Boise, Idaho; Cooperative Business Services in Cincinnati; Lafayette Square in Miami; and Stonehenge Capital in Baton Rouge, Louisiana, can now participate in the SBA’s primary lending program.

This initiative, announced on Monday, is being promoted as part of a larger effort to enhance access to capital for underserved groups and communities.

“For the second time in over 40 years, the Biden-Harris SBA welcomes new lenders with a shared mission of filling capital gaps in underserved communities –- the very same communities who are starting businesses at the highest rates in America today,” SBA Administrator Isabel Casillas Guzman said in a statement.

“With private markets playing an increasingly important role in small business lending, this expansion delivers against the Biden-Harris Administration’s unwavering commitment to providing affordable financing to the incredible entrepreneurs and new business starts revitalizing Main Streets across America. Congratulations to the four new licensees as they work alongside the mission-focused teams at the SBA to put the American dream of business ownership within reach for more entrepreneurs.”

The decision comes after the SBA announced plans to reopen the application window for new SBLC licenses in August. Leaders from the newly approved financial institutions have expressed their excitement about beginning to offer loans to small businesses in need.

“Small businesses are the backbone of the U.S. economy, and we are eager to quickly launch operations,” A10 Capital CEO Anuj Gupta said. “We look forward to applying our decades of knowledge, expertise and experience to provide lending solutions to small businesses nationwide.”

For decades, the SBA had imposed an arbitrary limit of 14 nondepository 7(a) lenders, a decision backed by banks and credit unions. In April 2023, the SBA lifted this cap.

The SBA grants SBLC licenses to chosen nondepository lenders to promote responsible small business lending. With an SBLC license, organizations can utilize the SBA’s 7(a) government guarantee program when underwriting small business loans, which lowers the lender’s risk and the borrower’s costs. Consequently, SBLCs can underwrite more loans to eligible small businesses than they could without government backing.