The Small Business Administration (SBA) has made a significant move to enhance access to capital for small businesses by granting licenses to four new Small Business Lending Companies (SBLCs). This decision marks the second consecutive year of expansion in the SBLC network, which had not seen new lenders in over 40 years until last year. The newly licensed institutions are Cooperative Business Services in Cincinnati, Ohio; At10 Capital in Boise, Idaho; Lafayette Square in Washington, D.C.; and Stonehenge Capital in Baton Rouge, Louisiana.
Key Takeaways
- Four new SBLC licenses awarded to enhance small business lending.
- The SBA aims to increase access to capital for underserved markets.
- The move follows a 40-year moratorium on new SBLC licenses.
- Critics express concerns over rising charge-off rates in SBA loan programs.
The SBLC licenses allow these lenders to issue government-backed loans, which are designed to mitigate risks associated with lending to small businesses, particularly those in underserved communities. This initiative aligns with the Biden administration’s commitment to providing affordable financing to entrepreneurs and revitalizing local economies.
Lafayette Square, one of the newly licensed companies, expressed its enthusiasm about the opportunity to expand its lending capabilities. The company aims to focus on historically underserved markets, enhancing its ability to support entrepreneurs in working-class areas. According to Damien Dwin, the Founder and CEO of Lafayette Square, the SBLC license will strengthen their securitization function and allow them to access low-cost funding to better serve small businesses.
The Impact of New SBLC Licenses
The addition of these four new SBLCs brings the total number of licenses in the marketplace to 20. This expansion is expected to significantly increase the volume of loans available to small businesses, particularly those owned by minorities, as SBLCs have historically outperformed traditional banks and credit unions in this area.
The SBA’s recent actions come amid rising concerns about the charge-off rates in its 7(a) loan program, which reached 0.56% in 2024, a notable increase compared to previous years. Critics, including Ami Kassar, co-founder of MultiFunding, argue that the SBA should exercise caution in its expansion efforts, as the increase in charge-offs may indicate underlying issues within the lending program.
A New Era for Small Business Lending
The SBA’s decision to award new SBLC licenses is part of a broader strategy to enhance access to capital for small businesses, especially in underserved communities. The agency’s commitment to supporting entrepreneurs is evident in its efforts to diversify the lending landscape and provide more options for business owners seeking financing.
As the SBA continues to navigate the complexities of small business lending, the introduction of new SBLCs is a promising development that could lead to increased economic growth and job creation across the country. The four new licensees are poised to play a crucial role in this mission, working alongside the SBA to ensure that the American dream of business ownership is within reach for more entrepreneurs than ever before.
