SBA: Two rules changes will make loan access easier
Two new rule changes went into effect this week for SBA 504 borrowers that officials say will help with qualification and eligibility.
The SBA recently published a final rule on the Federal Register that eliminates or revises several requirements for its two main loan programs, 7(a) and 504. The rule expands eligibility, makes it easier for small businesses to secure SBA-backed financing, and encourages job creation, said Ann Marie Mehlum, SBA associate administrator for the Office of Capital Access.
"These 504 and 7(a) program enhancements will expand program eligibility and improve access to capital for small businesses," she said in a news release. "Improvements in CDC (Certified Development Company) corporate governance oversight enhance program integrity and encourages more local involvement."
A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community.
The changes initiated by the Small Business Administration include, but are not limited to:
• Elimination of the personal resource test, which benefits borrowers by adding flexibility in the management of their allocation of personal resources to the small business;
• Elimination of the nine-month rule for 504 eligible project expenses, which allows businesses a longer timeframe in which to organize and initiate their small business project;
• Revised 504 loan program collateral requirements to allow third-party lenders to take collateral in addition to project collateral under certain conditions; and
• Enhanced CDC corporate governance requirements to ensure more board accountability and to reduce risks to the SBA portfolio.