Independent Banker - May 2023 - 43

Proposed rule changes could alter
the SBA 7(a) landscape
" PPP put SBA in
front of everybody
in a way that it
never has been
before. "
-ANNEMARIE MURPHY,
FIRST BANK OF THE LAKE
ICBA has been vocal in its opposition to SBA proposals that
it believes could undermine the integrity of the 7(a) lending
program. " Small businesses create millions of jobs in the U.S. "
says Stephen Keen, ICBA vice president of congressional
relations. " If this program is harmed, there can be real-life
consequences to Main Street Americans. "
The focus is on two key proposed rule changes that would:
1
bankers who are originating SBA 7(a)
and 504 loans across its footprint in
North Carolina, and it's expanding
that team with new hires that include
an SBA manager and a production
banker who will focus exclusively
on SBA. " We hope that a dedicated
team will really help us ramp up our
ability to put capital in the hands
of businesses, and in a lot of cases,
minority businesses, " says Rouse.
Supporting small businesses
The 7(a) program is a way for banks
to help their small business clients
access capital, while still managing
their own loan risk. The government
guarantee loan program provides
loans to small businesses that don't
qualify for conventional small
business loans.
" The key is that SBA is a credit
enhancer; it's not a credit mitigant, "
says Randy Vicknair, chief lending
officer at First Guaranty Bank in
Hammond, La. " So, it doesn't make
a bad loan good, but it does make a
good loan better. "
For example, the $3 billion-asset
community bank recently provided
a 7(a) loan for a business that had
been a customer for a number of
years. The company specializes in
online sales of business promotional
products and was looking for capital
2
Lift the existing moratorium on Small Business Lending
Companies (SBLCs), which are non-federally regulated
institutions, including fintech companies, that can make
loans under the 7(a) program
Loosen or remove 7(a)'s requirements for how lenders
underwrite loans and how borrowers may use loan funds
Bankers fear that expanding the universe of non-regulated
institutions along with loosening of underwriting standards will
result in riskier loans being made and higher loan defaults.
" Our concern is that if these [nonbank] lenders are allowed
to move from the PPP to the SBA 7(a) program, it will carry over
some of the problems that occurred under the PPP, " says Keen.
ICBA sent a joint comment letter to the SBA in January
expressing its concerns and is participating in a coalition
of 7(a) lenders pushing for regulatory hearings on the
proposed changes.
However, the final rule could be finalized imminently. ICBA is
encouraging bankers to reach out to their elected officials and
the SBA to express their concerns.
to make acquisitions that would allow
it to grow. According to Vicknair, one
of the reasons SBA was a good fit is
because the customer didn't have a lot
of collateral to put up. " We were able
to use the SBA guarantee to mitigate
that piece of it, because that guarantee
acts as collateral coverage for the
bank, " he says.
Looking ahead to the rest of 2023,
community bankers expect the
need for SBA loans to grow due to
what some anticipate will be a more
challenging economic environment.
75%
of 7(a) and 504 loans' risk
is backed by the SBA
independentbanker.org // 43
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Independent Banker - May 2023

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