Small Loan Advantage and Community Advantage 7(a) Loan Initiatives

SBA is committed to expanding access to capital for small businesses and entrepreneurs in underserved communities so that we can help drive economic growth and job creation. In line with that, SBA is rolling out two new initiatives on February 15, 2011, aimed at increasing the number of loans in these communities.

SBA and U.S. Department of Commerce studies have shown the importance of lower dollar loans to small business formation and growth in underserved communities. With that in mind, and building on the agency’s “Advantage” platform, both Small Loan Advantage and Community Advantage will offer a streamlined application process for SBA 7(a) loans.

Small Loan Advantage

• Small Loan Advantage is structured to encourage larger, existing SBA lenders to make lower-dollar loans, which often benefit businesses in underserved markets.

• Maximum Loan Size: $350,000

• Guarantee: 85 percent for loans up to $150,000 and 75 percent for those greater than $150,000.

• Approval Times: Most Small Loan Advantage loans will be approved in a matter of minutes through electronic submission (e-Tran). Non-delegated Small Loan Advantage loans will be approved within 5 to 10 days.

• Paperwork: Small Loan Advantage features streamlined paperwork, with a two-page application for borrowers and lenders can use their own note and guaranty agreement.

• Lender Requirements: Small Loan Advantage is open to financial institutions (currently 630 lenders) participating in SBA’s Preferred Lender Program (PLP).

• Time Frame: Lenders can begin submitting Small Loan Advantage loans on February 15, 2011.

Community Advantage

• Community Advantage is a pilot initiative aimed at increasing the number of SBA 7(a) lenders who reach underserved communities, targeting community-based, mission-focused financial institutions which were previously not able to offer SBA loans.

• Maximum Loan Size: $250,000

• Guarantee: 85 percent for loans up to $150,000 and 75 percent for those greater than $150,000.

• Approval Times: Most Community Advantage loans will be approved within 5 to 10 days.

• Paperwork: Community Advantage features streamlined paperwork, with a two-page application for borrowers.

• Lender Requirements: Community Advantage is open to mission-focused lenders, including Community Development Financial Institutions, SBA’s Certified Development Companies and SBA’s nonprofit microlending intermediaries. Community Advantage lenders will be expected to maintain at least 60 percent of their SBA loan portfolio in underserved markets.

• Time Frame: Community Advantage is a three-year pilot initiative. SBA will begin taking applications from mission-focused lenders interested in Community Advantage on February 15, 2011, with their subsequent loan applications being accepted in the weeks that follow.

• Community Advantage Participant Guide

• Community Advantage Approved Lenders

SBA’s Preferred Lender Program

• SBA’s Preferred Lender Program (PLP) includes many of the nation’s largest lenders who do high volumes of SBA lending.

• Preferred lenders can use a streamlined paperwork process with delegated authority to approve loans, which expedites the loan approval process for small business owners and delegates the final credit decisions to these lenders.

• Lending through the new Small Loan Advantage initiative is open to all of SBA’s PLP lenders for 7(a) loans of up to $350,000 with the regular 7(a) government guarantee.

Mission-Focused Lenders

• The Community Advantage pilot loan program will allow community-based, mission-focused lenders to make SBA 7(a) loans of up to $250,000 with the regular 7(a) government guarantee.

• These potential new SBA lending partners include Community Development Financial Institutions, SBA’s Certified Development Companies and SBA’s nonprofit microlending intermediaries.

• Community Advantage leverages the experience these institutions already have in lending in economically-challenged markets, along with their management and technical assistance expertise to help make their borrowers successful.

• Community Advantage lenders will be expected to maintain at least 60 percent of their SBA loan portfolio in underserved markets, including loans to small businesses in, or that have more than 50 percent of their workforce residing in, low-to-moderate income (LMI) communities; in Empowerment Zones and Enterprise Communities; in HUBZones; start-ups (firms in business less than 2 years); and veteran-owned businesses and those that would be eligible for Patriot Express.

• Following an initial evaluation period, mission-focused lenders participating in the Community Advantage pilot will be eligible to make Community Advantage loans under delegated authority.