OFN Applauds Critical Reforms to SBA Community Advantage Program

J.K. Phenix

On March 30, Opportunity Finance Network’s (OFN) President and CEO Lisa Mensah joined Vice President Kamala Harris, Small Business Administration (SBA) Administrator Isabel Guzman, and Commerce Secretary Gina Raimondo at Howard University where federal officials announced significant enhancements to the Small Business Administration’s (SBA) Community Advantage (CA) pilot program.

The event, hosted by the Greater Washington Partnership, also featured several OFN members and partners, including: Capital Impact Partners, Wacif, Baltimore Community Lending, National Association of Latino Community Asset Builders (NALCAB), Virginia Community Capital, Alliance of African American-led CDFIs, and AmPac Business Capital.

The CA program allows mission lenders like CDFIs to access SBA’s 7(a) government-guaranteed loan program. Eligible community-based lenders can provide SBA-backed loan guarantees of up to 85 percent on smaller dollar loans to help meet the credit, management, and technical assistance needs of small businesses in underserved markets.

The changes to the CA program are the result of months of unprecedented stakeholder engagement from the SBA’s Office of Capital Access. Over the past several months, OFN and small business lenders in our network worked directly with SBA to develop recommendations for improving the CA pilot program. To demonstrate support for the program reforms, OFN and NCRC were joined by 91 allies in a March 30 sign on letter to the Biden-Harris Administration.

On April 1, two key changes to the CA pilot program were published in the Federal Register:

  • Extending the pilot program to September 30, 2024, which provides more certainty for the CA program since it was set to end in September 2022

  • Lifting the lender moratorium to allow more mission lenders to access the program

Additional changes to the program will be published in an updated Community Advantage Participant Guide including:

  • Increasing the maximum eligible CA loan size from $250,000 to $350,000

  • Removing the restrictions that can keep individuals with criminal backgrounds from accessing the CA program

  • Simplifying underwriting and collateral requirements for borrowers and lenders, including increasing the maximum unsecured loan size from $25,000 to $50,000, thus removing barriers that disproportionally impact underserved borrowers

  • Allowing lenders to offer lines of credit, interest-only periods, and other loan modifications to best serve their borrowers’ capital needs

  • Updating packaging fee guidelines to better enable lenders participating in the CA program to scale and increase volume to underserved communities

OFN is disappointed that one of our primary recommendations to expand the definition of underserved to include women- and minority-owned businesses was not included in these reforms. We will continue to advocate for SBA to expand the definition of underserved market. However, we are pleased to see the Biden-Harris Administration implement other critical reforms that will help more small businesses access the capital they need.

For more information on the CA program, contact OFN’s SVP, External Affairs Dafina Williams.

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