On Apr. 22, SBA issued elimination of certain underwriting standards.
SBA reported elimination a package of Biden-era policies which dramatically reduced underwriting standards within the 7(a) Loan program, sacrificing its financial integrity.
New SOP 50.10.8 will reject the do what you do underwriting rules and revert lending criteria to the heightened pre-Biden standards; also reinstated franchise directory.
Follows Mar. 2025 actions to restore lender fees within 7(a) loan program, #248822.
Elimination of Policies
As the flagship SBA loan, the 7(a) loan guaranty provides government-backed capital through private lenders for qualified small businesses unable to borrow elsewhere.
By statute, it is required to operate at zero-subsidy, or zero cost, and historically pays for itself through lender fees, which cover the costs of any borrower defaults.
Despite mandate, Biden Administration eliminated lender fees, adopted underwriting standard do what you do, erased longstanding lending criteria within loan program.
As a result, the program saw massive rise in defaults and delinquencies which agency was unable to cover due to decreased fee income; negative cash flow of $397mn.
Amended SOP rejected do what you do rules, reverted criteria to pre-Biden standards.
Additionally, the new rule will reinstate and streamline the Franchise Directory to help lenders determine whether certain businesses are eligible to receive an SBA loan.
