On May 18 the Small Business Administration unveiled its risk-based framework for the securitization of the unguaranteed portion of loans made through its section 7(a) program, the SBA's largest loan program. This new structure is a key element in the agency's strategy of delegating more authority to its private lending partners while putting incentives in place that ensure that the SBA's, its partners', and the taxpayers' interests are closely aligned.

Since the section 7(a) program was established in 1958 to assist qualified small businesses in obtaining access to capital, the SBA has relied upon a risk-sharing arrangement with participating lenders as the cornerstone of its risk management strategy. By requiring that lenders accept on average 27% of the credit risk of each loan originated through the program, the SBA has ensured that lenders have a financial stake in the performance of 7(a) loans.

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