The Bank Slate


SBA set to expand SBLC participation in 7(a) lending

The Small Business Administration is set to end a 41-year moratorium limiting how many nondepository lenders from participating in the agency’s 7(a) loan guarantee program.

The SBA said the moratorium, which restricted 7(a) participation to 14 small-business lending companies (SBLCs), will be lifted on May 12. Three SBLCs are set to join existing lenders.

Banking groups have opposed increasing the number of SBLC participants. At the same time, several studies have linked fintech lenders to many of the cases of fraud associated with the Paycheck Protection Program the SBA managed during the earliest days of the pandemic.

The Independent Community Bankers of America, which has been fighting the change for months, had urged the agency to instead add more community bank partners.

Congress should “closely examine [the] SBA’s decision, particularly in light of … significant fraud linked to loans originated by fintech firms during the” PPP, Rob Nichols, president and CEO of the American Bankers Association, said in a statement.

Fraud risk was also cited by Dan Berger, president and CEO of the National Association of Federally-Insured Credit Unions. “We will continue to advocate for the SBA to safeguard the integrity of its essential programs from fraud-prone fintechs,” Berger said in a statement.

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