SBA Legislation Signed into Law

President Trump signed legislation that would strengthen the Small Business Administration's (SBA) 7(a) loan program.

The Small Business Administration’s 7(a) Loan Program partners with financial institutions to guarantee loans made to small business owners that fund their startup costs, equipment costs, or any other general business purpose. The program provides more flexibility for small business owners/entrepreneurs as the SBA allows historical and projected cash flow, and other non-traditional underwriting factors.

The reforms made in this bill will ensure the integrity of the program for small businesses that truly need the help of the SBA, while safeguarding taxpayer dollars. The bill also ensures the program can cope with any unexpectedly high loan demand in the future by giving the agency flexibility to make additional loans late in the year. This guarantees there is never a disruption in the flow of capital to businesses that count on this initiative for their financing needs.

The Lending Oversight Reform Act (H.R. 4743) increases the SBA's oversight authority over the 7(a) loan program by:

  • Strengthening SBA’s Office of Credit Risk Management by outlining in statute the responsibilities of the office and the requirements of its director;
  • Enhancing SBA’s lender oversight review process, including increasing the office’s enforcement options;
  • Requiring SBA to detail its oversight budget and perform a full risk analysis of the program on an annual basis; and
  • Strengthening SBA’s Credit Elsewhere Test by clarifying the factors that must be considered.

The portion of a member business loan (MBL) covered by a governmental loan guarantee is not counted against a credit union’s MBL cap so the SBA’s 7(a) loan program is a way for a credit union to expand its member business lending capacity. 

Even if a credit union doesn’t have an in-house business lending program, there is still an opportunity to offer members SBA-backed and other MBLs through the njBIZloan Connection.  Watch the League’s recorded webinar to learn how to get in the game.