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  • Writer's pictureJessica Lauver

Regulatory Shifts for Small Business Loans in 2023


In a recent development, the Small Business Administration (SBA) has announced significant changes to its lending rules, which will impact small businesses across the United States. These changes, which come into effect in 2023, aim to make it easier for small businesses to secure the funding they need to grow and thrive.


The SBA, a U.S. government agency that provides support to entrepreneurs and small businesses, is known for its role in helping small businesses get loans. The agency doesn't lend money directly to small business owners. Instead, it sets guidelines for loans made by its partnering lenders, community development organizations, and micro-lending institutions, thereby reducing the risk for the lenders and encouraging them to provide funds to small businesses.


One of the most significant changes involves the adjustment of the SBA's affiliation rules. Previously, these rules have often been a hurdle for small businesses seeking SBA-backed loans, as they required that the borrowing entity and any affiliated entities collectively meet the size standards for being classified as a small business.


Under the new regulations, the affiliation rules will be loosened, allowing more businesses to qualify for SBA loans. This change is expected to greatly increase the number of eligible small businesses. It will also make it easier for franchises, startups, and businesses with investor funding to access SBA-backed loans.


Another notable change is the revision of the personal resources test, a rule that previously required loan applicants to use certain personal assets to reduce the amount of the SBA-guaranteed loan if those assets exceeded a specific threshold. With the new changes, this rule will be abolished, making it easier for entrepreneurs to obtain loans without having to leverage their personal assets.


While these changes are expected to have a positive impact on small business lending, they are not without potential drawbacks. Some critics argue that the looser regulations could lead to an increase in loan defaults, which would ultimately be shouldered by taxpayers.


Overall, the SBA's new lending rules represent a significant shift in U.S. small business lending. By making it easier for small businesses to qualify for loans, the SBA is aiming to stimulate economic growth and promote entrepreneurship. However, the long-term effects of these changes remain to be seen.


For more information about the SBA's new lending rules, please visit their official website or consult with a financial advisor.


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