What is an SBLC? Access to SBA 7(a) Loans Without a Bank

Apr 18, 2022

A Small Business Lending Company (SBLC) is rare in the world of small business lending. What is an SBLC, and why are they impactful partners for small business owners?

An Uncommon SBA Small Business Lender

A Small Business Lending Company (SBLC) is a lender that has received a certification from the SBA to offer 7(a) loans in all 50 states. An SBLC must be a non-depository financial institution, or in other words, a lender that is not a bank.

SBLCs are few and far between. In January of 1982, the SBA decided that only 14 SBLC licenses can be in use at the same time. That means a new SBLC is only created when another SBLC relinquishes their license, allowing it to change hands. Typically, many years, or even decades, pass before a new SBLC enters the market.

Institutions that accept deposits, as in banks, savings and loans, and credit unions, can be certified to offer 7(a) loans, too, but they are not SBLCs. Only a non-depository lender can become a licensed SBLC.

The process of becoming an SBLC is not fast or easy, but it’s worth it for lenders who want to supply small businesses the benefits of SBA loans through their growth stages and beyond.

To qualify to offer the SBA’s 7(a) program, lenders must:

  • Show that their company can complete all the steps of small business lending on a long-term basis and in a high-quality way
  • Issue small business loans based on requirements outlined by SBA
  • Meet and maintain strict ethical requirements set by the SBA
  • Be in good standing with Federal or State examiners

Benefits of a Non-Bank Lender

Small business owners often prefer non-bank lenders for their flexibility, transparency, lower rates and fees, and more efficient processing times. Underserved small business owners who don’t have relationships with a bank also tend to prefer non-bank lenders.

A 2021 NYU study revealed that non-depository fintech lenders were the most effective at deploying PPP funding to Black-owned businesses. This is because the automation in their processes made them:

  • More efficient at funding more loans in smaller amounts, instead of fewer loans in larger amounts
  • Easily able to serve customers in areas where there are few, if any, brick-and-mortar branches
  • Least likely to be influenced by human biases

Benefits of the SBA 7(a) Program

The U.S. Small Business Administration has several SBA lending programs, including: 7(a) Program, 504 Program, and Export Loan Programs. Each program has different rules about what kind of lender can offer them, what amounts can be loaned, and what small business owners can use the funds for.

Across the board, SBA loans are easier and cheaper than non-SBA loans for small business owners who are looking to secure financing. They’re designed to help small business owners who are not ready, or don’t yet qualify, for traditional loans.

  • Lower rates and more flexible terms
  • Relaxed credit requirements
  • Loans are funded by the lender and partially backed by federal guaranty

The 7(a) program offers loan sizes up to $5 million but can be as low as $1,000. They can be used for many purposes, like equipment purchases, renovations and expansions, working capital, acquiring a business, and refinancing certain kinds of debt, as well as purchasing commercial real estate.

SBA loans are guaranteed up to 85% by the federal government. That means SBA lenders are more likely to take on the risk of lending to a promising business owner with a lower credit score, little collateral, or less extensive credit history. (In other words, borrowers who will not likely receive approval from a non-SBA lender.) 7(a) loans make it possible for small businesses to grow, become employers, and graduate to qualifying for traditional financing in larger amounts. Even though SBLCs are rare, they are impactful partners helping small businesses thrive and serve their communities.

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