Read time: 4 minutes
OFN has made progress toward expanding CDFI eligibility for key lending programs.
Throughout 2023, the OFN policy team has been working hard to advocate for and represent mission lenders on Capitol Hill and beyond. With Washington slowing down in August while Congress is in recess, we are taking stock of our progress.
We are sharing a series of updates across all OFN federal policy priorities that advance our shared 2023 policy agenda.
OFN is making a real difference when it comes to increasing CDFIs’ access to federal lending programs. Here’s how our public policy team is advancing these policy priorities.
Small Business Lending
The Small Business Administration’s (SBA) proposed rule to lift the moratorium on Small Business Lending Company (SBLC) licenses has been at the center of the agency’s agenda during the first half of 2023. OFN sent a comment letter in January. We wanted to know more about this new license and what it means for the Community Advantage pilot program.
Our stance? Responsible business lending practices should guide updates to the 7(a) Loan Program.
In April, the SBA decided to lift the moratorium, allowing new non-depository lenders into the 7(a) program for the first time since the early 1980s. In response to OFN’s questions about the future of the Community Advantage program, the SBA introduced CA SBLCs – a new SBLC license for lenders with a mission. This move allowed existing Community Advantage lenders to switch their licenses to SBLC ones. This shift received mixed reactions.
Our voice was heard loud and clear. Two OFN members made their case at a Senate Small Business Committee hearing in May. On top of that, at our Small Business Finance Forum in June, there was an entire session dedicated to this topic. OFN Board member Robert Villarreal presented, alongside the SBA’s Katie Frost and OFN members Wendy Baumann of Wisconsin Women’s Business Initiative Corporation and Everett Sands of Lendistry.
Since then, there’s been a bit of tug-of-war between Congress and the SBA over this rule change. In late July, Senators Ben Cardin (D-MD) and Joni Ernst (R-IA) found a middle ground. They introduced the Community Advantage Loan Program Act of 2023 to push financing for underserved small businesses. The bill would finally make permanent the Community Advantage program, a longtime priority for OFN. There’s a catch, though – the draft bill doesn’t include businesses owned by people of color or women in its definition of “target markets.”
The future of the Community Advantage program in its current form is uncertain. Without action from Congress, the SBA plans to sunset it completely by September 30 of this year, and the new CA SBLC licenses would take its place.
To ensure the program continues, both the House and Senate will need to pass legislation. The Senate version passed out of committee, but no word yet on when a House bill will move forward.
Increasing CDFI access to federal lending programs also includes more liquidity from Federal Home Loan Banks. Back in March, the Federal Housing Finance Agency asked “What’s the future for the Federal Home Loan Bank System?” We chimed in with a comment letter to make sure they know that focusing on low- and moderate-income communities is the way to go. We also included recommendations to lower barriers to entry for CDFI loan funds so that they can access more capital and more of the benefits the system offers.
Learn more about our small business and affordable housing policy priorities, and ways to engage on policy efforts with OFN, at our policy action center.
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