Sofia Gilkeson, Public Policy Associate, Opportunity Finance Network
Leaders from Ampac Business Capital and Accion Opportunity Fund advocated for more clarity on the SBA’s rule and how it can best support underserved communities
On April 26, the Senate Small Business and Entrepreneurship Committee held a hearing titled “Oversight of the Small Business Administration’s (SBA) Implementation of Final Rules to Expand Access to Capital.” This hearing follows the SBA’s April 12 release of their much-anticipated final rule on lifting the moratorium on Small Business Lending Company (SBLC) licenses.
The hearing consisted of two panels. The first panel included witnesses from the SBA: Patrick Kelley, associate administrator at the Office of Capital Access; and Sheldon Shoemaker, deputy inspector general at the Office of the Inspector General.
The second panel featured two CDFI leaders from OFN’s membership. Hilda Kennedy, founder and president of AmPac Business Capital, and Chris Pilkerton, chief legal officer at Accion Opportunity Fund, testified to the impacts of the final rules on SBA lenders.
During the hearing, members of the Committee expressed concern over the implementation of the SBA’s final SBLC rule to lift the moratorium, creating a new Community Advantage SBLC, and removal of Loan Authorization. Chairman Ben Cardin (D-MD) stated the SBA had not taken into consideration public comments, noting the lack of clarity on how the agency would administer the new SBLCs and how the Community Advantage Pilot Program lenders would transition to the Community Advantage SBLC. Ranking Member Joni Ernst (R-IA) shared similar concerns while also raising apprehension about the potential of allowing an unlimited number of fintechs into the SBA’s 7(a) Lending Program.
In her testimony, Kennedy highlighted the work of her CDFI, as participants of the SBA’s 504, Community Advantage, and microloan programs, having made more than $1 billion in 504 loans in the past 16 years. Kennedy’s remarks focused on encouraging the SBA to support reaching underserved communities across all SBA lending. She advocated for Senator Cardin’s bill, the Community Advantage Loan Program Permanency Act from the previous Congress, codifying areas where the final rule lacked clarity, specifically requirements for loan loss reserve, cash requirements, and most importantly, the definition of underserved.
In Pilkerton’s remarks, he stated that the final rule did not meet the need to establish a consistent approach to responsible lender review. He advocated for a thoughtful independent study to ensure clarity about the scope of the program and how it can be responsive and responsible to underserved communities.
According to Kelley and previous conversations SBA Administrator Guzman had with Senator Cardin, the key details missing from the final rule (loan loss reserve, capital market requirements, etc.) will be released in the Standard Operating Procedure (SOP) set to come out May 5.
Ahead of the release of the SOP, the SBA issued a notice to Community Advantage lenders on May 1 that Community Advantage SBLCs would have to meet the same requirements that exist under the current Community Advantage Pilot Program. That includes maintaining the requirement that a minimum of 60% of the number of Community Advantage loans be made in underserved communities.
The notice also requires current Community Advantage lenders seeking to transition to Community Advantage SBLC status to execute a Form 750, Loan Guaranty Agreement and makes updates to the loan loss requirements. More details will be released in the SOP.
Sofia Gilkeson, OFN’s Public Policy Associate, Hilda Kennedy, and Chris Pilkerton at the hearing.
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