White House Raises Cap on Small Business Loans

The White House says it is making it easier for underserved small businesses to get capital.

The Biden administration announced in a news release Friday (Nov. 29) that the Small Business Administration (SBA) had increased the maximum loan amount backed by its Community Advantage Small Business Lending Companies (CA SBLCs) from $350,000 to $500,000 for active lenders in good standing. 

“These mission-based non-depository lenders — often Community Development Financial Institutions (CDFIs) — focus on providing access to capital to underserved businesses and underinvested businesses, ensuring that women, people of color, veterans, rural, and low- and moderate-income communities have access to SBA-backed capital,” the release said.

And after small businesses in 2023 received a record $86 billion in subcontract awards from the federal government, the Office of Management and Budget (OMB) is increasing access to federal subcontracting opportunities, the release added.

The office is issuing guidance to government agencies on how to expand subcontracting opportunities for small businesses, the main way for them to compete as prime contractors. 

The announcement came one week after a Bloomberg News report that the Federal Reserve’s pandemic-era Main Street Lending Program had $1.23 billion in interest and principal payments in default as of the end of October.

According to that report, the program delivered $17.5 billion in loans, with much of those funds having been repaid. However, some borrowers are struggling with high interest rates, balloon payments and post-pandemic changes in consumer behavior.

The Main Street Lending Program made 1,830 loans of $100,000 to $300 million. It was a program designed for mid-sized businesses that were too big to participate in the Paycheck Protection Program and too small to turn to capital markets.

But the rates on the loans are adjusted, which ended up being a burden on borrowers as interest rates jumped after the pandemic. The loans also had a repayment schedule with no payments for the first year, leaving borrowers with payments that increased along with interest rates.

Meanwhile, PYMNTS wrote last month about another lending challenge facing small businesses. While embedded lending can benefit these companies, the idea of sharing their data with lenders can be a tough pill to swallow.

“Despite the advantages for lenders, many SMBs hesitate to share their financial data, citing concerns about data privacy and misuse,” PYMNTS wrote. “In Japan, only 13% of small businesses feel comfortable sharing real-time data, compared to 71% in India, the report notes. Businesses with previous experience in embedded lending are more likely to share data, with 73% of all small businesses surveyed that have used it expressing comfort with doing so again.”