SBA Plans to Streamline Business Loan Process

business loan application form and calculator
The Small Business Administration has announced that it will attempt to streamline the SBA loan application process.

 Jeanne Hulit, SBA Associate Administrator for Capital Access, told us via email that the current process stifles job creation. By changing the way the SBA loan application process works, the loan program could lead to higher levels of employment.

“Particular changes in the program are stripping away regulatory restrictions that prohibit core job creation,” she explained.

These new changes were made after challenge-focused discussions with lenders and borrowers showed the need for re-evaluation.

According to a recent SBA press release, there are four primary changes that are being proposed.

The first is to eliminate the Personal Resource Test. If implemented, borrowers will no longer have to obtain the highest level of personal finance resources if they are applying for 7(a) and 504 SBA loans, the most common types of financing guaranteed by the SBA.

The second proposed change is the revision of the Rule on Affiliation. This change will allow businesses associated with other companies to obtain access to SBA loans. Under current SBA rules, businesses associated with other enterprises are barred from receiving financing. Additionally, the revision of this rule would result in a paperwork reduction for applicants.

“Our lending partners have provided feedback that the paperwork burden for demonstrating that a small business is independent and not affiliated with a big business is a big paperwork burden and discourages them,” said Hulit.

The elimination of the nine-month rule for the 504 loan program is the third proposal. Should the SBA implement this change then businesses would no longer be restricted to include the expenses they have incurred in the nine months prior to their application submission. Businesses would then be allowed to include expenses from any time period.

“We know a lot of projects had to be put on hold for a variety of business reasons,” said Hulit. “So, by eliminating the nine month rule we are being more realistic that businesses have a variety of different reasons for starting investment in their projects.”

The final change would be the increasing of accountability of the Certified Development Companies’ Board of Directors while Eliminating Requirements for Membership. This change would increase board accountability for the 504 loan program. If successful, this would mean that more SBA loans will be successfully repaid after wise use.

Hulit explained that there should be an increase of 40,000 SBA loans lent in the next 5 years as a result of these changes. That would be a $30 billion increase, which she estimated would lead to the creation of over 500,000 jobs.

The proposed rule changes will be undergoing a 60 day comment period in which the SBA will gauge the public’s reaction.