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Advantage loan initiatives

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Are you a small business in an underserved community? Are you a woman-owned business, or a minority business? If so, you need to learn about the Advantage Loan Initiatives, which the SBA rolled out in February 2011. They pulled out two new loan advantages to increase the number of loans to small businesses and entrepreneurs in underserved communities.

1. The Small Loan Advantage
2. Community Advantage

In addition to the Advantage Loan Initiatives the SBA streamlined the application process for SBA 7 (a) loans up to $250,000. The following is information on what small businesses know about advantage loan initiatives:

The first thing you should know is that new lenders are not part of the Small Loan Advantage. The SBA is using existing partners and set up this program to encourage them to make lower-dollar loans to help the smaller businesses in underserved communities. The maximum loan size is $250,000. SBA guarantees 85% of the loans up to $150,000 and 75% over $150,000 up to $250,000. Only lenders already participating in the SBA’s PLP can offer Small Loan Advantage loans. In addition to larger guarantees and smaller sums, the approval time has been streamlined. Applications are submitted online, and approved in a matter of minutes using the e-Tran electronic submission process. If the business is applying for a non-delegated small loan advantage loan, it will take 5-10 days for approval. Of course, good news for businesses besides faster approval times is that the application is also significantly shorter, being only a couple of pages.

For the Community Advantage initiative, the SBA is looking for new lenders willing to serve underserved communities, specifically lenders that are mission focused or community based. This is a pilot program developed to certify lenders for SBA loans who were previously unable to offer SBA loans. In order to qualify, the lender has to be willing to maintain a portfolio with at least 60% SBA loans going to underserved communities. These underserved markets or communities are defined as small businesses with half the workers residing in LMI communities.

With this loan initiative, the underserved markets can get loans at a maximum size of $250,000, with an SBA guarantee for 85% up to $150,000 and 75% for over that amount. Community Advantage loans take 5-10 days to gain approval, which is far faster than past SBA loans. In addition, the application was streamlined to make it far faster, with it only being two pages long for borrowers.

SBA developed these Advantage Loan Initiatives to encourage lenders to loan to the underserved communities, in order to promote job growth and economic development. It will allow far more small businesses to obtain loans in smaller amounts, and create a slew of new SBA certified lenders in the bargain. This will open doors for underserved small businesses who have previously been unable to obtain financing with SBA backing.

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Posted by DK
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