Joint Trades Letter on Proposed SBA Regulations (Affiliation Proposed Rule & SBLC Proposed Rule)

Dear Administrator Guzman:

The signatories on this letter are the leading organizations representing virtually all the lenders participating in the U.S. Small Business Administration (SBA) 7(a) loan program. We are writing to request that you withdraw the two Proposed Rules—the Affiliation and Lending Criteria for the SBA Business Loan Programs, 87 FR 64724 (“Affiliation Proposed Rule”), and the Small Business Lending Company (SBLC) Moratorium Rescission and Removal of the Requirement for a Loan Authorization, 87 FR 66963 (“SBLC Proposed Rule”)—that were recently published for public comment in light of recent Congressional reports and hearings, as well as Administration studies, that all suggest significant concerns with the direction of SBA’s sweeping changes to the 7(a) loan program.

Together, the regulatory proposals, if adopted, would lay out a detrimental shift in the 7(a) loan program. Both the Affiliation Proposed Rule and the SBLC Proposed Rule propose removal or modification of long-existing prudent lending standards which have ensured programmatic integrity for decades. It is into this new framework of significantly loosened lending standards that the SBLC Proposed Rule intends to open the 7(a) loan program to an unlimited number of non-federally regulated lenders without guardrails or any defined focus on mission lending, despite SBA stating that the intention of these rules is to aid underserved borrowers. Given the intertwined nature of the two proposals, we believe that they need to be considered together.

Our organizations fully support SBA’s stated goals in proposing these regulatory changes – aiding traditionally underserved borrowers, as well as increasing the availability of 7(a) loans and the numbers of lenders so that more small businesses can have access to SBA loans. However, we believe that the changes, as proposed, may not actually help minority and underserved communities, and could unintentionally harm the very borrowers that SBA is trying to aid.

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