Nikola Stojadinovic/Getty Images.
Key takeout
-
SBA created the Program License Community Advantage Small Business Lending Company (CA SBLCS) to provide a permanent solution to the lack of traditional SMEs and business loans accessible in underserved communities
-
The CA SBLC program is built on a pilot program with the same name.
-
The latest application period for the CA SBLCS license will open in late 2024, with no news about the application period for 2025 yet
The need for accessible traditional SME loans cannot be denied, especially in underserved communities. Fed 2024 focus data companies revealed that 56% of white entrepreneurs who applied for funding were fully approved, while less than 35% of the small number of applicants were fully approved.
The US Small Business Administration (SBA) has designed community advantage (CA) loans to close this gap. However, this was a pilot program that sunk on October 31, 2023. To create a permanent solution, SBA has established a license to the Community Advantage Small Business Lending Company (CA SBLC). Many of these SBLCs moved directly from the temporary pilot programme, but additional compatriots who did not participate in the pilot secured this license. Today, more than 140 lending institutions have SBLC licenses, and they place them in support of businesses in underserved communities.
Find out what small business lenders are and how lenders can participate in this program.
What is SBA Community Advantage Small Business Lending Company?
In 2023, the SBA chose to change the rules, lift the SBLC moratorium and introduce Community Advantage Small Business Lending Company (CA SBLC). SBLC is a professional lender approved by the SBA and manages regular SBA 7(a) loans focused on supporting small businesses in underserved markets.
CA SBLC aims to expand access to capital in underserved communities, including women, minorities, veterans and people from low-income communities. Although certain lending requirements limit traditional SMEs’ access to funding, by focusing solely on credit scores, business cash flows and collateral, these lenders can approve loans from underserved communities at a higher rate.
As part of the permanent programme, the SBA accepted a series of applications for the new CA SBLC between June 1, 2023 and July 31, 2023 and September 2, 2024 to December 20, 2024. The SBA does not publish any information regarding future rounds.
SBA CA Small Business Company vs. SBA Small Business Lending Company
CA SBLCS and SBA Small Business Companies (SBLCS) both aim to support small businesses by creating SBA loans, but the two lenders differ when it comes to licensing.
As an SBA SBLC, lenders can provide access to small businesses to SBA loans, particularly 7(a) loans. SBA SBLC can also provide loans to intermediaries offering SBA microloans, which are less than $50,000 in less than $50,000. Applications for the SBA SBLC license will be closed, but once the lender is approved for this license, they are authorized to earn more loan amounts as they use government guarantees to reduce the risk of lenders and borrowers.
CA SBLC licenses are designed for community-advantage lenders targeting businesses in underserved communities. These are CA lenders who have temporarily joined the SBA Community Advantage Loan in the CA Pilot Program, who have participated when the program transitioned to its current permanent status, or who have applied and been approved during previous open application periods. With this license you have the permanent authority to create regular 7(a) loans up to $350,000 for small businesses in underserved markets.
How to become SBA Community Advantage SBLC
Currently, SBA is not accepting new applications for CA SBLC. Lending agencies interested in protecting this type of license must monitor the SBA for the release of new rounds of notices to the federal register. Historically, these notices were entitled “Small Business Lending Company Application Process.”
Community Advantage SBLC Requirements
All lenders interested in becoming a CA SBLC must adhere to certain SBA rules and guidelines. This includes operating as a nonprofit organization and operating as one of the following types of organizations:
- Certified Development Company (CDCS)
- Community Development Financial Institutions (CDFI)
- Interim Lending Pilot (ILP) Program Intermediate
- Microloan Program Intermediate
From details of current CA SBLC requirements, the required bond coverage required for lending institutions, it is included in each federal register publication that announces the application process.
Conclusion
Community Advantage SME lenders can close the gap if access to traditional SMEs is limited. By applying to become a CA SBLC, lenders can provide access to capital and expand their support to businesses in underserved communities.