The U.S. Small Business Administration recently proposed new regulations that would allow borrowers and lenders better access to loans backed by the agency. The changes would make the loan application process easier while also increasing agency oversight of the program and limiting unnecessary or redundant paperwork for those seeking SBA financing.
SBA loans play an important role for companies seeking startup funding or general project finance to grow their firms. When loans from other outlets aren't approved, many entrepreneurs rely on the SBA to help. The proposed changes could streamline the process and make it easier for business owners to apply for and receive the funding they seek.
Major proposed alterations
How will entrepreneurs find they have increased access to SBA-backed loans? There are several proposed changes, the first of which would get rid of the personal resource test. Previously, borrowers were forced to jump through hoops to obtain 7(a) and 504 loans - new rules would eliminate the current processes that to determine the amount of collateral required.
Another proposition will change the role of affiliation, allowing companies that currently do not qualify as small businesses because of their partnerships with other corporations to finally obtain SBA financing. This initiative could also limit the amount of paperwork owners much complete in order to be considered for such a loan.
The SBA's new rules would also strike the nine-month rule for 504 loan programs from the books. Businesses are currently banned from including expenses incurred more than nine months ago before a loan application - overturning this rule would allow companies to mention other large expenditures.
One of the other changes the SBA wants to make is changing its focus on Certified Development Company corporate governance mandates. The SBA aims to increase executive accountability and increase oversight in this area to better manage the program.
"Streamlining and simplifying has been a key focus of out agency over the last few years," said Karen Mills, SBA administrator. "The changes are the latest steps to reduce paperwork burden, with our eye on the larger goal of expanding access to capital and giving entrepreneurs and small-business owners the financial resources to grow and create jobs. Specifically, these proposed regulations will provide greater access to capital through our two largest loan programs, while also reducing risk to taxpayer dollars."
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