Finance Circle Applauds Biden-Harris Administration’s Plan to Allow Fintech Participation in SBA Flagship 7(a) Program

by James · October 9, 2022

Get on Wall Street with StreetInsider Premium. Claim a 1-week free trial here.

The Small Business Administration (SBA) will lift a 40-year moratorium on allowing state-licensed Fintech lenders to originate state-guaranteed small business loans, increasing financing options for 31 MM+ small business owners in the US

DENVER–( BUSINESS WIRE )– The White House this week announced plans to introduce a rule lifting a 1982 Small Business Administration (SBA) moratorium on issuing new licenses for Small Business Lending Companies (SBLCs), which would expand the SBA -supported 7 (a) loan origination ability for state licensed and regulated lenders operating domestically in the United States.

Under this new rule, fintech lenders like Funding circle — the leading online platform for small business loans — and others, including non-federally regulated lenders and non-deposit lending institutions, will be able to begin originating these loans even after acquiring an SBLC license from the SBA. Prior to the introduction of S.2690, the Expanding Access to Affordable Credit for Small Business Act, state licensed lenders were limited to issuing SBA 7(a) loans in one state. Additionally, since 1982, only 14 SBLC licenses have been issued, further limiting access to financing for many US small and medium-sized businesses (SMBs).

The SBA intends for this policy to increase lending to the smallest and minority-owned businesses amid a steady decline in loans under $250,000 from traditional banks, which the agency has historically relied on to distribute 7(a) and 504 loans. SBA has received research and proposals from members of Congress, and has witnessed Paycheck Protection Program (PPP) fintech lenders step up to serve businesses disproportionately overlooked by other types of lenders. Expanding the program to include fintech lenders serving the population SBA aims to reach means more small business owners will have access to alternative, government-backed options for financing.

“Funding Circle applauds the Biden administration, along with Sens. Tim Scott (R-SC) and John Hickenlooper (D-CO) and Reps. Byron Donalds (R-FL) and Jason Crow (D-CO) for working with this bipartisan. , bicameral resolution to help expand access to capital for America’s smallest and underserved businesses,” said Ryan Metcalf, Head of Public Policy and Social Impact at Funding Circle US.

The announcement follows the release of research by the Bank for International Settlements (BIS) and the Federal Reserve Bank of Philadelphia that analyzed proprietary loan-level data from two small business fintech lending platforms, one of which was Funding Circle. The study found that Funding Circle expands credit access to underserved small business owners who are unlikely to receive financing from traditional lenders and does so at a lower cost, in part through a more accurate loan risk assessment process.

About Funding Circle

Funding Circle (LSE: FCH) is the leading online lending platform for small business borrowers. Since 2010, Funding Circle has raised $4.1 billion to 40,000 small businesses in the United States and $19.4 billion to $130,000 globally.

For small businesses, Funding Circle provides a leading customer experience, delivered through its technology, machine learning and data science, combined with a human touch. The solutions continue to help clients access the financing they need to succeed.

For institutional investors, Funding Circle provides access to an alternative asset class in an underserved market and delivers robust and attractive returns.

For financial institutions, Funding Circle offers a digital end-to-end lending-as-a-service solution that enables faster, lower-cost financing for small business customers.