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Biden-Harris Administration expands SBA Pilot Program targeting access to capital for underserved entrepreneurs

Vice President Kamala Harris unveils improvements to SBA Community Advantage Pilot Program at White House Event with SBA Administrator Isabella Guzman.

On Wednesday, March 30, Vice President Kamala Harris and Administrator Isabella Casillas Guzman, head of the U.S. Small Business Administration (SBA) and the voice for America’s 32.5 million small businesses in President Biden’s Cabinet, announced impactful reforms to the agency’s Community Advantage (CA) loan program, a key SBA tool for Community Development Financial Institutions (CDFIs), Community Development Companies (CDCs), microlenders and other critical mission-based lending partners, that prioritizes equitable access to capital for low-income borrowers and those from underserved communities.

SBA Administrator Isabella Casillas Guzman. (Photo Source)

“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. 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,” said Administrator Guzman

“The Community Advantage pilot expansion and reforms reflect the central role that President Biden and Vice President Harris have given to building equity across this Administration and removing historic inequities and barriers that have limited economic growth for all. My thanks to Vice President Harris, a longtime champion for Community Development Financial Institutions and other mission-driven lenders, for supporting this important change and helping to improve access to capital for more American entrepreneurs.”

Among the reforms announced for the Community Advantage program, the SBA will: 

  • Extend the pilot program to September 30, 2024, providing more certainty for the Community Advantage program, which was set to end in September 2022.
  • Lift the four-year lender moratorium and enable the SBA to grow this important lender network, opening up a critical capital program to more mission-based lenders across the country.
  • Increase the maximum loan size, the new expanded number of lenders will be allowed to access the SBA’s 7(a) government-guaranteed loan program at lending levels up to $350,000, which represent an increase over the current levels of $250,000.
  • Remove the restrictions that can keep individuals with criminal backgrounds from accessing the Community Advantage program.
  • Simplify underwriting and collateral requirements for borrowers and lenders, including increasing the maximum unsecured loan size from $25,000 to $50,000, removing barriers that disproportionally impact underserved borrowers.
  • 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.
  • 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.

Filling Gaps by Connecting Underserved Small Businesses to Capital

Designed to meet the credit, management, and technical assistance needs of small businesses in underserved markets, the SBA’s Community Advantage pilot loan program was launched during the Obama-Biden Administration and originally set to expire in September 2022. The program was intended to provide mission-oriented lenders, primarily nonprofit financial intermediaries focused on economic development, access to 7(a) loan guarantees previously for loans of only $250,000 or less. Community Advantage continues to be the best avenue to allow mission-driven lenders to access SBA 7(a) loans. The SBA’s goals for the Community Advantage program include:

  • Increasing access to credit for small businesses located in underserved areas;
  • Expanding points of access to the SBA 7(a) loan program by allowing participation of non-traditional, mission-oriented lenders; and 
  • Providing Management and Technical Assistance (M&TA) to small businesses, as needed.

You might be interested: SBA Women’s Business Ownership Assistant Administrator Natalie Madeira Cofield shares resources for women entrepreneurs to grow and thrive

Allies Praise Biden-Harris Administration Expansion of SBA’s Community Advantage Pilot Program 

Marla Bilonick, President and CEO, NALCAB of the National Association for Latino Community Asset Builders: “The Community Advantage Pilot Program (CA) is a lifeline for Latino small businesses and aspiring entrepreneurs in underserved markets. Through nonprofit financial intermediaries that have deep knowledge of their communities, CA provides the tools and support needed to be successful. NALCAB has been closely engaged with the SBA on changes to the CA program that will help even more of our nation’s innovators start a business, grow and create new jobs. We applaud these reforms and urge swift adoption.”

Ron Busby Sr., President and CEO, U.S. Black Chambers, Inc: “The US Black Chambers is proud to support the changes to the Community Advantage program, understanding that the program plays a critical role in connecting Black businesses to capital in their communities. CDFIs ensure that Black firms can access capital from institutions that look like them, live in their communities, and understand their local economies. Underscoring that access to capital is the primary barrier for Black businesses to grow and scale, we applaud the SBA and the White House for working with stakeholders to ensure that programs like Community Advantage can continue to adapt to meet the needs of today’s economy.

Hilda Kennedy, Founder and President, AmPac Business Capital: “I have been involved on a number of committees, but I have never seen a regulatory body so committed to hearing the voices of the constituents with a timebound commitment to execute on what they heard.  I am utterly confident that these reforms in Community Advantage will have a game-changing impact on loans to underserved communities and specifically those communities that have had a 30-40% drop in SBA Lending – Black and Latino communities. The SBA Administrator came to Washington DC, not for pomp and circumstance, but to roll up her sleeves and work for small businesses, and she has delivered in just one year!”  

To learn more about Community Advantage and additional small business financial assistance programs, visit your local SBA office at www.sba.gov.

VP Harris and Treasury announced $8.7B in investments for small and minority-owned businesses

On Tuesday, U.S. Secretary of the Treasury Janet L. Yellen and Vice President Kamala Harris announced the release of $8.7 billion in investments through the Emergency Capital Investment Program (ECIP) to help increase lending to small and minority-owned businesses and people living in underserved communities with limited access to banking, The Associated Press reported. 

The funds from the ECIP will go to 186 community-based financial institutions. ECIP enables the Treasury to make direct investments in banks, credit unions and holding companies that are designated as a Community Development Financial Institution (CDFI) or a Minority Depository Institution (MDI).

Institutions headquartered in 36 states, as well as Guam and Washington, D.C. will be recipients of the deployed $8.7 billion. States with the largest number of institutions being offered ECIP investments include Mississippi, Louisiana, North Carolina, California, and Texas. Among the institutions recommended for an ECIP investment, approximately 54% are banks and 46% are credit unions. The ECIP investments will range, depending on the size of the institution, from over $200 million to less than $100,000. Of the funds, a total of $3.1 billion is being offered to 57 minority depository institutions.  

US Department of the Treasury, Public domain, via Wikimedia Commons

“We know that the communities hurt most by COVID-19 have often been communities of color, and Treasury has implemented relief legislation with equity in mind,” said Secretary Janet L. Yellen in a press release Tuesday. “Today, we’re seeing one result of that effort: Treasury, through the Emergency Capital Investment Program, is injecting nearly $9 billion into Community Development Financial Institutions and Minority Depository Institutions.”

According to the Associated Press, “Black Americans represent 13.4% of the U.S. population, yet Federal Reserve figures show they control just 4.3% of household wealth and more than half of Black household wealth is in the form of pension entitlements, which cannot be passed along to future generations.” 

The racial divide and these inequities in wealth have contributed to many of the hardships people of color face when applying for loans, mortgages, and other financial assistance. ECIP investments will help in bridging this gap by supporting  mission-motivated institutions to increase responsible investments in low- and moderate-income and minority communities that have disproportionately suffered from the impacts of the COVID-19 pandemic.

In a moderated conversation at the Freedman’s Bank Forum, Vice President Kamala Harris addressed these inequities stating, “Here’s what I know to be true: America is a nation that is driven by the ambition and the aspirations of her people.  But I also know that, in America today, deep racial disparities continue to hold people back from achieving all they can.

“Today, the wealth gap persists.  Today, the homeownership gap persists.  Today, access to capital is unequal.  As one example, Black entrepreneurs are three times more likely to report that a lack of access to capital negatively affects their profit margins. 

“I believe that the actions we are taking and must take to address these disparities will define our nation’s strength and economic strength in the 21st century.”