Magazine article American Banker

SBA Expanding Eligibility Requirements under Final Rule

Magazine article American Banker

SBA Expanding Eligibility Requirements under Final Rule

Article excerpt

Byline: Sarah Todd

The Small Business Administration is changing some of its lending rules to expand access to its two main programs.

The new requirements for the 7(a) and 504 loan programs were published on the Federal Register and will become effective April 21, according to the agency's Monday press release. Small businesses use 7(a) loans for a wide variety of purposes, while they typically take out 504 loans to buy, build or renovate real estate.

Two of the most noteworthy changes under the SBA's final rule will expand the number of applicants who qualify for SBA loans and the expenses that loans can cover.

The SBA is getting rid of the personal resources test, which refused loans to borrowers with cash and other liquid assets deemed sufficient to obtain non-federal financing. The SBA "has become concerned that even borrowers whose principals have significant personal resources may be unable to obtain long-term fixed asset financing from private sources at reasonable rates," the agency said in a rule proposal issued Feb. 25.

The SBA is also eliminating a rule that restricted financing for 504 loans to expenses incurred no more than nine months before small businesses submitted SBA loan applications. The SBA frequently grants exceptions to this requirement because "the date the expense was occurred is a poor indicator as to whether the expense was directly attributable" to the project, according to the agency's proposal. …

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