WASHINGTON
-- Today the U.S. Small Business Administration announced a new loan service designed
to spur economic growth in America's heartland by encouraging community banks
and credit unions to finance small businesses and entrepreneurs with SBA resources.
Rural Lender Advantage is part of a broader SBA initiative to boost economies
in regions that face unique challenges due to factors including population loss
or high unemployment rates. Part of the agency's popular 7(a) loan program, Rural
Lender Advantage enables smaller, rural lenders a partnership with SBA by requiring
less paperwork and offering services online.
"America's
heartland is essential to the nation's economy, so SBA is committed to encouraging
entrepreneurship and generating job growth in rural regions," SBA Administrator
Steve Preston said. "Rural Lender Advantage is the result of listening to
our friends in the rural small business community and developing a service tailored
to their needs. I am pleased to announce that we will test the new service in
six states and hope to expand it in the future."
The
key features of Rural Lender Advantage include:
- A shorter, simplified
application for loans of $350,000 or less.
- Application may be completed
and submitted online.
- An estimated, expedited loan processing time
of only 3-5 days for routine loans.
- Limited but only key financial
documentation required.
- SBA's guaranty of 85% if the loan is $150,000
or less; 75% if the loan is more.
- A new, user friendly 7(a) loan
portal designed to meet the needs of small/rural lenders for SBA loans of $350,000
or less.
- Simplified SBA loan questionnaire to help small or occasional
lenders understand eligibility criteria.
- Specialized assistance for
rural lenders on complex eligibility issues (affiliates, aliens, etc).
The
new service is intended to increase SBA's market penetration in rural areas. Small
businesses account for two-thirds of all rural jobs and comprise more than 90
percent of all rural establishments. However, there are almost 400 fewer banks
nationwide that took advantage of SBA loan programs than there were two years
ago. Because community and rural banks accounted for much of this drop, an SBA
advisory team was formed to review and develop a strategy to win them back. The
team found that few small lenders and community banks use SBA loan services because
they may not have the time, staff or technical capability to comply with the agency's
loan criteria.
In response, SBA created Rural Lender Advantage
and will test it in Colorado, Montana, South Dakota, North Dakota, Utah and Wyoming.
The agency expects there will be 3,000 to 4,000 loans made in the first year of
implementation.
"Rural Lender Advantage should meet
the needs of small community lenders that don't make as many loans," said
Preston. "The approval process is simpler, more user-friendly and saves time
for lenders that might have been deterred from using our programs before due to
the more complex requirements necessary for larger loans. We're excited to introduce
this service and believe it will open a window of opportunity for small business
owners in rural America."
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