SBA Wants to Add Fintechs to its Biggest Lending Program

Source: American Banker

In what would be a major policy change, the Small Business Administration appears set to lift a 40-year moratorium on participation in the flagship 7(a) program by nondepository lenders.

Since 1982, President Ronald Reagan's second year in office, the SBA has capped the number of nonbank, noncredit union institutions permitted to make 7(a) loans at 14. In an email Tuesday, Christalyn Solomon, an agency public affairs specialist, wrote that the SBA will soon unveil a notice of proposed rulemaking (NPRM) authorizing additional small-business development companies to seek 7(a) licenses. 

"SBA is drafting a notice of proposed rulemaking on this topic, and it will be posted in the Federal Register with a 60-day public comment period," Solomon wrote. "The timing of when the NPRM will be posted in the Federal Register is undetermined, however the draft document has been written and is under review by the Administration."

Plans to open 7(a) to fintechs and other nondepository lenders were first disclosed by Vice President Kamala Harris this month in an appearance at the annual Freedman's Bank Forum in Washington. According to a fact sheet prepared by the vice president's staff, ending the moratorium would spur more small-dollar 7(a) loans, benefiting entrepreneurs from disadvantaged communities, who frequently seek smaller sums of capital than other small-business borrowers.