The federal program for small-business lending is undergoing its biggest makeover in decades, the Wall Street Journal reported. The Small Business Administration is simplifying loan requirements, automating more of the process and expanding the pool of nonbank lenders licensed to issue SBA loans. The moves, many of which take effect Aug. 1, will make it easier for financial-technology firms to participate. SBA officials say that they want to boost credit to small businesses that have struggled to get financing as banks favored bigger commercial borrowers. But the changes — and the decision to couple relaxed requirements with new lenders — have drawn criticism from the industry and members of Congress, who say the revisions could jeopardize the program by increasing loan defaults. Legislation sponsored by Senate Small Business Committee Chairman Ben Cardin (D-Md.) and co-sponsored by ranking member Joni Ernst (R-Iowa) would direct the SBA to conduct annual stress tests of licensed small-business lending companies, which aren’t overseen by federal banking regulators, and add guardrails and speed bumps to the processing of loans by new nonbank licensees. The legislation would also make permanent a pilot program aimed at helping underserved borrowers secure small-dollar loans.
