Magazine article American Banker

SBA Opening Up Popular Program to More Borrowers

Magazine article American Banker

SBA Opening Up Popular Program to More Borrowers

Article excerpt

Byline: Marissa Fajt

The Small Business Administration is restructuring its popular Community Express program to broaden borrower eligibility and funnel more lending to low-income areas.

Currently the program serves minorities, women, veterans, and those in low-income areas, but starting Oct. 1 anyone would be eligible for the loans.

Loans over $25,000 would be earmarked only for "historically underutilized business zones," or HUBZones, and Community Reinvestment Act areas. Loans under that amount could be made anywhere.

"We think this is a program that will clearly be targeted to the neediest borrowers - the ones with the least access to credit and the areas with the most need," said Janet Tasker, the SBA's deputy associate administrator of capital access.

Ms. Tasker said the changes to Community Express are a result ofthe Justice Department's shift away from programs with gender and ethnicity eligibility criteria.

Also starting Oct. 1, the maximum interest rate lenders may charge is to be aligned with the SBA's biggest program, its 7(a) loans. That means prime plus 2.25% for loans longer than seven years and prime plus 2.75% for shorter-term loans.

Currently lenders are allowed to charge 4.5% over prime for loans larger than $50,000 and 6.5% over prime for loans less than $50,000.

The reduction is not expected to sting because many lenders already apply the 7(a) rate to Community Express loans, according to industry trade association representatives. …

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