Small Businesses have always formed the backbone of the American economy.  These entrepreneurial pioneers embody the spirit of possibility, the tireless work ethic, and the simple hope for something better that lies at the heart of the American ideal. The problem is, our small businesses have been some of the hardest hit by this recession.  There’s no question that the steps we’ve taken have improved the overall climate for small businesses across the country, but there is more we need to do. And that’s why today, we’re announcing new steps to support more lending to America’s small businesses—steps that will lead to more jobs, more growth, and a stronger economic recovery. – President Barack Obama

President Obama spoke these words during a conference call in which he discussed his plan for small businesses and the future of the American economy. For years now, small business owners have lamented over politicians whose platforms boasted increased focus on entrepreneurial engagement and aggressive strategies for ensuring the growth of the economy through maximizing small business growth. These words, however, are often just a show of smoke and mirrors with little to no follow-through.

changeFortunately, recent changes in SBA lending rules seem to indicate that the Obama administration is attempting to break the habit. The proposed SBA changes came in late February with the goal of affording “[b]orrowers and lenders of loans backed by the U.S. Small Business Administration…greater access to capital and less paperwork as a result of a proposed regulation aimed at streamlining the SBA application process, while also strengthening oversight and the integrity of the agency’s loan programs.”

According to the SBA website, the proposed changes include, but are not limited to the following:

  • Eliminating the Personal Resource Test: A borrower will no longer be required to obtain a maximum level of personal finance resources for a 7(a) or 504 loan. This will streamline the loan process by eliminating complicated regulations used to determine the amount of collateral required.
  • Revising the Rule on Affiliation: Revising this rule will open access to SBA loans to businesses that, under current rules, would not qualify as a small business under SBA’s size standards by virtue of their association with other companies. It also would streamline 504 loan applications and reduce paperwork requirements for 504 and 7(a) loan applications.
  • Eliminating the Nine-Month Rule for the 504 Loan Program: Eliminating the Nine-Month rule removes a restriction that limits a business to include in its 504 project only expenses incurred nine months prior to submitting the loan application. The new rule would allow inclusion of expenses incurred at any time (e.g., projects put on hold for more than nine months due to a natural disaster).
  • Increasing Accountability of the Certified Development Companies’ Board of Directors while Eliminating Requirements for Membership: Refocusing CDC corporate governance requirements will reinforce the importance of board accountability for CDC oversight for the 504 loan program and set in place measures to strengthen oversight in order to maintain program integrity.

For more information on these changes please visit this page for a summary of proposed OCA regulation changes. You can also access the full text here (pdf). You might also like to check out this NY Times summary of the proposed changes.
[cc photo credit to adam*b via flickr]