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New SBA Programs Aim to Boost Lending in Underserved Communities

The Small Business Administration (SBA) has created two new programs to increase SBA-backed loans to small businesses and entrepreneurs in traditionally underserved communities. These communities include women, minorities and those living in rural areas.

The two new initiatives, announced in Washington Dec. 15 by SBA administrator Karen Mills, are the Small Loan Advantage and Community Advantage programs. These initiatives are designed to increase the number of lower-dollar SBA 7(a) loans going to small businesses and entrepreneurs in underserved communities. These government-guaranteed loans — the most popular SBA loan product — can be used for a variety of general business purposes, including working capital and purchases of equipment and real estate.

Studies done by the SBA and U.S. Department of Commerce have shown the importance of lower-dollar loans to small business formation and growth in such communities, where owners and entrepreneurs continue to face challenges accessing capital .

Both programs will offer a streamlined application process of loans up to $250,000. These loans will come with the regular 7(a) government guarantee , in which the government can guarantee as much as 85 percent for loans up to $150,000 and 75 percent for loans greater than $150,000.

The Small Loan Advantage program will be available to the 630 financial institutions nationwide in the agency’s Preferred Lender Program.  With the Community Advantage program, the SBA will expand the points of access small business owners have for getting 7(a) loans by opening the program to “mission-focused” financial institutions, including Community Development Financial Institutions (CDFIs), Certified Development Companies (CDCs) and nonprofit micro-lending intermediaries.

“These new Advantage initiatives are aimed directly at getting more loans into these markets so these small business owners can get the capital they need to start or grow their business and create good- paying jobs in local communities across the country,” Mills said.

Mills also announced the creation of a new Advisory Council on Underserved Communities, which aims to provide input, advice and recommendations on how the SBA can help strengthen competitiveness and sustainability for small businesses in underserved communities. The council will be headed by Catherine L. Hughes, chairperson and founder of Radio One and a former SBA borrower.

“Many entrepreneurs and small business owners across the country have enormous potential to drive economic growth and create good-paying jobs in their local communities, but too often they face barriers in fulfilling that potential,” said Hughes. “I’m excited to be a part of this effort to strengthen the link between these entrepreneurs and the SBA’s wide variety of resources. SBA assistance played a critical role in my success.”

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.

Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.