St. Louis, MO, April 25, 2023 – As we open our 2023 Spring Conference, I want to welcome our in-person and virtual attendees, and to share with those of you who are not able to join us, the message that we will be providing over the next two days – especially as it relates to the two recent Final Rules on affiliation and lending criteria and Small Business Lending Companies (SBLCs) and the loan authorization.
As NAGGL members know, we always have supported SBA’s stated goals for issuing these rules – increasing access to capital for America’s small businesses, especially those in underserved markets, and streamlining the processes by which SBA loans are made. So, we look forward to making even more progress when it comes to finding ways to increase 7(a) lending to markets with capital gaps, including minority-owned, women-owned, veteran-owned, and rural small businesses, among others. This commitment is not new for us. Over the years, NAGGL has endorsed and otherwise been involved in legislative and administrative solutions intended to improve access to capital for underserved small businesses. And today, we are proud that the successful 7(a) program continues to increase lending to underserved markets, with nearly three-quarters of all 7(a) loans being small dollar loans, and roughly one-third of all 7(a) loans going to minority-owned small businesses.
But while we applaud SBA’s continued focus on serving underserved markets and hope to continue the good work that the 7(a) industry already has achieved, the serious concerns that we set out in NAGGL’s comment letters, submitted as part of the rule-making process, still stand. We continue to have significant program integrity concerns over loosening underwriting standards at the same time that the program is being opened to a potentially unlimited number of non-federally regulated lenders that will have only SBA as their primary regulator. NAGGL is particularly troubled that changes made between the Proposed Rule and the Final Rule on SBLCs seem to leave even fewer mechanisms to ensure that the new SBLC lenders will have any responsibility for filling capital market gaps. We were also disappointed to note that in promulgating the Final Rules, SBA did very little to address the specific concerns and recommendations made by those who commented on various aspects of the regulatory proposals.
The long-standing SBA and lender partnership has stood the test of time. But we understand that even partners as close as SBA and NAGGL do not always see every issue in the same way and do not always agree on the best approach to resolve a particular issue. So, we are taking a multi-pronged approach to addressing our concerns. As part of this strategy, we have joined our financial industry colleagues in urging Congress to act to mitigate the negative impacts these rules could have on SBA’s flagship loan program. In addition to working with the Congress, we also are looking forward to working with SBA and with 7(a) lenders in an attempt to understand the new requirements and to mitigate any unintended consequences that may result from the rule changes.
You will hear this message repeated during the conference and in the days to come – NAGGL’s commitment to the integrity of the 7(a) program remains our guiding principle and we will continue to champion the policies that will ensure this program’s long-term viability by every means available to us.
