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Tuesday, February 7, 2023

Readout of Roundtable on Capital Access for Small Businesses

Yesterday, Small Business Administration (SBA) Administrator Isabel Guzmán, Treasury Undersecretary Wally Adeyemo, American Rescue Plan Coordinator Gene Sperling and National Economic Council Deputy Director Bharat Ramamurti joined Senator Hickenlooper and small business leaders, advocates and Mission Lender with Special Expertise in Accessing Minority Small Businesses Discusses the Biden-Harris Administration’s Small Business Agenda for Expanded Capital Access, including the SBA’s new proposed rules and the Treasury Department’s historic investment in CDFIs. The group includes nonprofit mission lending groups, community development financial institutions (CDFIs), foundations and advocacy groups, all of whom specialize in meeting the needs of historically underserved small business owners.

Participants agreed on the importance of breaking down funding barriers by meeting small business owners locally, providing multiple avenues to access capital, and providing support services needed to navigate available programs to better reach underserved small business owners. The Biden-Harris administration is trying to meet those needs in a number of ways, including by investing in the American Rescue Package, which lays the groundwork to support small businesses for years to come. The SBA is proposing reforms to make it easier for lenders to partner with the SBA to provide small dollar loans, expanding the lender pool and capital options for small businesses, with a focus on historically underserved businesses. Treasury launched a cross-agency effort to identify service gaps in underserved communities and made historic investments in CDFIs, which are often primary lenders to minority-owned businesses.

Administrator Guzmán outlined her SBA capital access reform agenda. This includes a proposal to lift the suspension on Small Business Loan Corporation (SBLC) licenses, proposed reforms to Small Business Investment Corporations (SBICs), and a proposed simplification and modernization of affiliation, lending standards, and employee ownership requirements for SBA business loan programs. The proposed SBLC rules would allow the SBA to pilot expanded lending activities while ensuring appropriate lender engagement and protection protocols. The Administrator identified a priority for these new SBLC licenses to be a diverse representation of lenders who responsibly meet particularly pressing small business capital needs, such as microlenders, minority businesses, and rural communities. Additionally, later this year, the SBA plans to introduce major technology improvements to its Small Business Borrower-Lender Matching Tool to improve the experience and convenience of matching potential borrowers and lenders.

The Deputy Secretary spoke about the historic collaboration among the agencies of the Biden-Harris administration to support underserved communities, especially in community investment and access to capital. Through the Emergency Capital Investment Program, CDFI funds, and state small business credit programs, Treasury has deployed billions of dollars to help small and minority businesses and consumers. In July, Vice President Harris announced the creation of the Interagency Community Investment Council (ICIC), chaired by the Treasury Department, which has since led a process to solicit input on how agencies can better coordinate to support underserved communities.

Senator Hickenlooper emphasized the importance of expanding small business activity across the country and highlighted the role that responsibly regulated fintech companies can play in expanding access to affordable capital for underserved small businesses, while protecting system integrity.

At the meeting, participants praised the Biden-Harris administration for these moves, which have improved access to capital and addressed persistent lending gaps. One participant noted how welcome and necessary it would be to actively consider expanding the SBLC license to focus on mission-based lenders, and commended the SBA for prioritizing a measured license expansion to ensure consumer protection. Another leading small business advocate highlights how the expansion of the SBLC license will diversify lending options, including mission lenders and responsible fintech options, to fill critical capital gaps, and praises the SBA for borrowing The principle of human protection. Several participants emphasized the importance of ensuring that capital allocations reflect the diversity of America and its small business owners. The panel discussed key opportunities for expanded use of technology to expand lending operations, alternative underwriting models, and technical assistance delivery.

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