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NAFCU Reg Alert highlights SBA’s proposed SBLC moratorium rescission
NAFCU sent members a Regulatory Alert Monday outlining the Small Business Administration’s (SBA) proposed rule to allow new lenders to apply for a license to offer SBA-backed 7(a) small business loans. The SBA has had a moratorium on new Small Business Lending Companies (SBLCs) since 1981. The proposed rule would also remove the requirement for loan authorization under the 7(a) and 504 loan programs.
The Regulatory Alert highlighted that the proposed rule would lift the moratorium on licensing new SBLCs and create a new type of mission-based SBLC, which would be a specific, nonprofit SBLC to fill an identified capital market gap. Additionally, the alert noted SBLCs are regulated, supervised, and examined solely by SBA. As SBA-regulated entities, SBLCs are subject to specific regulations regarding formation, capitalization, and enforcement actions.
The rescission of the moratorium on SBLCs would allow 7(a) lending by non-depository institutions, though SBA only anticipates three new SBLCs in the full first year after the proposed rule becomes effective. Fintechs and other alternative lenders would be able to apply for an SBLC license; however, credit union service organizations (CUSOs) may also be eligible to apply for an SBLC license. SBA intends to periodically issue Federal Register notices to open and close application periods to allow them to respond more quickly to needs in underserved markets.
Comments on the proposed rule are due to NAFCU on Dec. 16. Subscribe to receive Regulatory Alerts in your inbox.