AmiSight 10/7: The SBA Should NOT Be in the Direct Lending Business
- Ami Kassar
- Oct 7, 2021
- 1 min read
There is a move underway by some parties in Washington to put the SBA into the Direct Lending Business. This initiative, in my opinion, is a terrible idea.
Traditionally, the only time that the SBA lends money directly is when there is a disaster, and they use the EIDL program. This program is designed to work in small targeted areas. However, the program has been nothing short of a disaster when large-scale disasters have happened, such as COVID 19.
The SBA works best when it serves as a guarantee program, and banks and some non-bank authorized lenders leverage it.
The goal is to expand SBA lending and availability, particularly to underserved businesses that need smaller loan amounts. We can accomplish this by simplifying the requirements of smaller loans. These changes would make it easier and faster for banks to make these loans.
This news came out a few weeks ago. In a talk with a CDFI partner right after the press release my CDFI friend couldn’t understand how this effort would work with government funding being directed towards mission based lenders. Most CDFIs are the micro lenders in this space and depend on the SBA programs.
I am curious to see how the conversation expands. Small SBA micro loans under $150K are hard to find. Historically lenders have been unable to fill the need gap. If lenders do not offer smaller loans, SBA will provide a solution because the need is there. With the investment in automated underwriting portals on the SBA side, maybe there is a solution that could work. It’s…