STL Partnership Receives SBA CDC Award for Commitment to 504 Loan Program
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Business Journals
2 days ago
- Business Journals
The SBA reverts back to stricter lending standards
Effective June 1, 2025, Standard Operating Procedure (SOP) 50 10 8 introduced several significant changes to the U.S. Small Business Administration's (SBA) lending program. One main area of focus on this latest version of the SOP is underwriting standards. The SBA has reintroduced the underwriting standards that lenders were accustomed to pre-2021. This stems from some lackluster statistics that the SBA saw as recently as last year. For fiscal year 2024, the SBA 7a program saw negative cash flow. This was the first year of negative cash flow for the program in over a decade. According to current SBA officials, one key reason for this negative cash flow was the substantial rise in defaults from underqualified buyers. The 'do what you do' philosophy that the SBA permitted SBA lenders to use during the Biden Administration has been eliminated in full as part of the latest SOP. This philosophy allowed SBA lenders to use their respective internal commercial lending practices when SBA guidance was not explicitly clear on applicable procedures. This is no longer allowed with the new SOP, and stricter underwriting requirements are back in place. Moving forward, the SBA is effectively requiring all loans to be collateralized. Any SBA loan of $50,000 or more will require collateral, significantly down from the threshold of $500,000. The SBA has also returned to a 10% equity injection threshold on any transaction involving a startup business or change of ownership. The highly popular use of seller notes will also be impacted under the scope of the new equity injection requirements. Under the new SOP, only full standby seller notes that carry the entire term of an SBA 7a loan can qualify as part of the equity injection, but only up to 50% of the required equity injection amount. Notes with principal or interest payments, and even partial standby notes, do not fall within the SBA's scope to satisfy some, or all, of an equity injection requirement. The SBA's franchise directory was also brought back to assist SBA lenders. The directory confirms if a given franchise and business model is preapproved by the SBA. For the preapproved franchises, SBA review of franchise due diligence is no longer necessary. For franchises and business models that don't appear in the directory, ineligibility is possible, but if not, a thorough review of franchise, license and management agreements, as applicable, must be handled by SBA lenders. To further improve efficiency of the due diligence review process for franchise lending, a franchise will get added to the franchise directory upon submission of a signed master agreement with a lender and the SBA. By getting this agreement submitted and approved, every SBA borrower applying for financing in connection with a given franchise will not need to obtain and provide a franchise addendum to the SBA. The franchise addendum is no longer required for any borrower using SBA lending. Overall, the latest changes in the SOP have likely reduced the volume of SBA-eligible borrowers that lenders have been accustomed to for the last several years. While reduced volume is not something that any lender wants to hear, the stricter underwriting and eligibility requirements will reduce headaches for lenders that came from the substantial rise in defaults.
The Hill
2 days ago
- The Hill
Trump signs executive order targeting debanking
President Trump signed Thursday an executive order taking aim at alleged discrimination against conservatives by large banks, directing regulators to investigate and punish financial institutions for 'politicized or unlawful debanking.' Conservatives have long complained that they have been unfairly treated by the banking system, a cause taken up by Trump in his second term. 'Financial institutions have engaged in unacceptable practices to restrict law-abiding individuals' and businesses' access to financial services on the basis of political or religious beliefs or lawful business activities,' Thursday's order reads. 'Such practices are incompatible with a free society and the principle that the provision of banking services should be based on material, measurable, and justifiable risks,' it continues. The order directs banking regulators to investigate and punish financial institutions for debanking as violations under consumer protection laws and the Equal Credit Opportunity Act. It also calls on the Small Business Administration (SBA) to instruct the institutions it oversees to identify and reinstate any clients denied services through a 'politicized or unlawful debanking action.' Banking regulators are also directed to remove 'reputation risk' from guidance used to examine financial institutions, in addition to rescinding or amending regulations that also consider reputation. The issue of debanking — the closure of accounts that banks consider risky, often with little notice or explanation — appears to have taken on a personal note for Trump, who said earlier this week that he was turned away from several major banks, including JPMorgan Chase and Bank of America. 'I'll give you me as an example,' he told CNBC Tuesday. 'I had hundreds of millions. I had many, many accounts loaded up with cash, loaded up with cash, and they told me, 'I'm sorry sir, we can't have you. You have 20 days to get out.'' Concerns about debanking initially emerged on the right in the wake of 'Operation Choke Point,' an Obama-era initiative that discouraged banks from working with 'high-risk' clients, including firearm dealers and payday lenders. Debanking has received new attention in recent months, as the crypto industry has also alleged it was unfairly denied access to the banking system. The industry cheered both the debanking order and a second order signed by Trump on Thursday, allowing 401(k) investors to access crypto, private equity, real estate and other digital and alternative assets. 'Ending the discriminatory practice of debanking lawful crypto companies sends a clear message: the era of 'reputation risk' being used to justify financial exclusion is over,' Blockchain Association CEO Summer Mersinger said in a statement. She also touted the 401(k) order for 'expanding consumer choice and empowering individuals to responsibly build wealth using some of the best-performing assets of the past decade.'
The Hill
3 days ago
- The Hill
Senate Republican questions new Intel CEO's ties to China
Sen. Tom Cotton (R-Ark.) on Tuesday pressed the chair of Intel's board about its CEO's ties to China, voicing concerns about the integrity of the semiconductor firm and U.S. national security. In a letter to Intel board chair Frank Yeary, Cotton pointed to recent reporting on Lip-Bu Tan's investments in hundreds of Chinese tech firms, at least eight of which have ties to the Chinese military, according to Reuters. Tan was tapped to lead Intel in March, after former CEO Pat Gelsinger stepped down last December following a 'challenging year' for the company. Before joining Intel, Tan was CEO of Cadence Design Systems — another point of concern raised by Cotton. The software company produces electronic design automation (EDA) technology, which is used to design chips. It agreed to plead guilty and pay $140 million last month for violating export controls by selling the technology to a Chinese military university. 'Intel is required to be a responsible steward of American taxpayer dollars and to comply with applicable security regulations,' Cotton wrote, noting Intel's nearly $8 billion grant under the CHIPS and Science Act. 'Mr. Tan's associations raise questions about Intel's ability to fulfill these obligations,' he added. Cotton asked Yeary what measures Intel has taken to address concerns about Cadence's activities, which occurred during Tan's tenure, and whether it has required him to divest from China-linked semiconductor firms or other 'concerning entities.' The Arkansas Republican also questioned whether Tan has disclosed his China investments and ties to the U.S. government given Intel's involvement in a Pentagon program to build chips for defense and intelligence needs.
