A House committee has softened a controversial amendment that would have barred nearly 800 banks from a popular Small Business Administration lending program.
The "certified lender" program allows banks to get faster loan approvals from the SBA. As originally drafted, the legislation would have required banks to make eight SBA loans a year for two consecutive years to be considered certified lenders. Rural banks would have been required to make four SBA loans a year for two years.
The House Small Business Committee voted Thursday to ease the limits by allowing banks with "substantial experience" in SBA lending to qualify as certified lenders. That term was not defined, but if the bill becomes law, the SBA will clarify it.
Currently, 1,517 banks are considered certified SBA lenders. If the loan-volume minimums were had been imposed, 791 of those banks would have been disqualified.
The committee also voted to allow securitization of the unguaranteed portion of 7(a) loans, the agency's leading program. However, lenders must retain at least 10% of securitized SBA loans.
Finally, the original legislation was relaxed to allow "experienced" lenders to participate in the SBA's "low-doc" program, which is aimed at reducing paperwork for SBA-guaranteed loans. Again, the SBA will define the term. Originally, the bill would have limited low- doc loans to certified or preferred lenders.
SBA does not have many hard and fast rules explaining what it takes to become a certified or preferred lender, but a preferred lender has its loan portfolio examined annually by SBA and is required to employ two SBA- trained loan officers. Certified lenders usually get a loan decision from SBA within three days. Preferred lenders are permitted to make loans without SBA approval.
The banking industry is supporting the legislation.
"The House did a good job in balancing the interests of small-business borrowers, lenders who want to service that community, and any concerns the community might have about the low-doc portfolio," said Herb Spira, tax council for the Independent Bankers Association of America.
"The reasonable focus on the experience of lenders combined with the focus on insuring that the very successful low-doc program can continue was a very appropriate balance and we were very pleased," said Floyd Stoner, deputy executive director for government affairs at the American Bankers Association.
The bill also would give certified lenders more authority to liquidate SBA loans. Currently, the agency liquidates about 40% of problem loans, but the committee decided that handing the work to banks would be more efficient because they know the borrowers better. The SBA would have three days to approve requests for liquidation made by certified lenders. Preferred lenders already have this authority.