What has happened to the SBA Community Express loan program?
In recent months, the #1 SBA program has been all but non-existent. A program which was the savior to most people in need of quick capital has been all but put on hold. This is due to the federal government enforcing a CAP on community express lenders. The SBA rules state that a pilot program can not exceed more than 10% of the entire 7a loan volume within a given year. This year, due to the economic recession and credit restraints the banks have imposed on their lending criteria, the SBA Community Express Loan was helping people with the financing of their business. Thus, the program exceeded the 10% production volume and the government decided to audit the program to verify its efficiency.
The Community Express Loan has an SBA guarantee of 85%, limiting the lenders risk to only 15% compared to a 100% risk the banks would have on conventional non-SBA loans. This makes it easier for lenders to approve deals due to the lower risk. Typically, individuals who do not qualify for a loan are eligible under the Community Express program because the SBA’s goals are to enhance Small Business activity throughout the country by offering guarantees to the bank on behalf of the client.
The two top Community Express Lenders, Innovative Bank and Superior
In mid July, we were told that the cap has once again been reduced from 75 loans to 10 loans a month. We were not only shocked but worried that the Community Express Program which was set up to assist Small Businesses with capital was going to be around long enough to continue to make an impact on the growth of Small Businesses. Due to the latest restraints on the program, only the businesses which are approved for the highest amounts are being funded because lenders make the most money on the higher loan amounts due to the interest income received.
What’s next for the Community Express Loan program?
We are told that once the audit is over there will be a decision on the program come the new SBA fiscal year which begins October 1-st. We think that there are really 3 things that may happen. 1. The program passes the audit and the Community Express Program continues as a permanent loan program instead of its current pilot status. 2. The program is restructured with new guidelines and requirements. 3. The program is canceled due to its inefficiency. Whatever happens to the program, SBA will remain a key advocate for small businesses through its other programs and services.