SBA doubles maximum loan amount for loan program

SBA doubles maximum loan amount for loan program (Courtesy of the Jacksonville Business Journal) — The Small Business Administration is expanding its lending efforts to boost energy-efficiency and climate-focused projects.

The agency’s move — branded as the SBA’s Green Lender Initiative — targets its Community Advantage program, the mission-driven component of the SBA’s prime 7(a) loan program. The agency is increasing the maximum loan size available through the program to $500,000 — up from a current $350,000 cap that also requires projects to be in specific geographic areas.

The agency will be creating an application process for participating lenders to expand their geographic reach. It also will allow lenders to apply to expand their loan sizes up to $1 million — or $2 million for climate-related projects.

“Small businesses and homes account for more than one-third of U.S. emissions, so it is vital that they are part of the solution,” SBA Administrator Isabel Guzman said in a statement announcing the changes. “The SBA’s new Green Lender Initiative aligns private capital with investments in America so that more mission-driven climate lenders can leverage the SBA federal loan guarantee programs to fund the small business clean energy transition.”

The SBA’s latest actions would allow businesses — with the help of partner lenders like banks and Community Development Financial Institutions — to tap into parts of the Environmental Protection Agency’s $27 billion Greenhouse Gas Reduction Fund. That fund, authorized by the inflation Reduction Act signed into law by President Biden, provides financing for climate-friendly projects, including residential and commercial energy-efficiency projects across the country.

The effort also means the SBA can bring to bear its loan guarantees and its access to the secondary market — into which its loans are packaged and sold to help finance new lending — as well as longer loan maturities and friendlier collateral requirements than often can be found in the private markets.

SBA upgrades loan, business programs

The SBA under the Biden administration has been enhancing its loan programs and tweaking its small-business services as part of a wider effort to expand lending to the smallest and most underserved businesses.

The agency last month announced it would roll out a new structured line of credit that aims to offer more flexibility to lenders and small-business owners. The 7(a) Working Capital Pilot Program would use a fee structure similar to the agency’s existing Export Working Capital Program and its SBA Express loans offering, under which there are no fees for loans under a certain amount but gradually scale up as the loan gets larger. The fee structure also changes based on whether the loans are shorter or longer than 12 months.

The SBA also recently lifted a loan maximum in its 504 loan program for energy efficiency and renewable energy projects.

Before that, the agency gave its Lender Match tool an improved mobile interface and the ability for owners to view all of their matched lenders in one place to help compare different organizations. The enhanced tool also will verify borrowers and screen for fraud in an effort to streamline the lending process. Additionally, small businesses not matched to lenders will be connected to the SBA’s local network of free advisers.

SBA surety bond guarantees went up in March for the first time since 2013. That means the SBA is now able to guarantee bid, performance, payment and ancillary bonds of up to $9 million for all projects and $14 million for federal contracts — up from $6.5 million and $10 million, respectively. 

The SBA also recently revamped and rebranded its existing 7(j) Management and Technical Assistance Program — now called the Empower to Grow program — which offers customized, one-on-one training and consultation to qualifying small-business owners.

Last year, the agency expanded the number of lenders in its 7(a) loan program for the first time in more than 40 years.

All of those actions are separate from a series of changes the SBA rolled out for its disaster-loan program that dramatically boosted loan sizes and extended deferment periods for homeowners and business owners alike.

Last July, the SBA said it had awarded $169.2 billion in contracts to small businesses in fiscal 2022, an all-time high. The federal government awarded $8.7 billion more to small-business contractors compared to fiscal 2021 and, at 26.5%, it exceeded the Biden administration’s goal of 23% of federal-contract awards going to small businesses.

But the overall number of prime small-business contractors continued to shrink in that time period, with 62,670 in fiscal 2022, down more than 4% from the 65,428 reported in fiscal 2021. While federal-contract spending has been trending upward, the number of small businesses receiving prime contract awards has been declining — meaning a larger share of dollars has been going to a smaller pool of businesses. Between fiscal 2010 and fiscal 2021, the number of small businesses receiving government contracts fell from 121,270 to 65,428.