The Small Business Administration is restructuring its popular Community Express program to broaden borrower eligibility and funnel more lending to low-income areas.

Currently the program serves minorities, women, veterans, and those in low-income areas, but starting Oct. 1 anyone would be eligible for the loans.

Loans over $25,000 would be earmarked only for "historically underutilized business zones," or HUBZones, and Community Reinvestment Act areas. Loans under that amount could be made anywhere.

"We think this is a program that will clearly be targeted to the neediest borrowers — the ones with the least access to credit and the areas with the most need," said Janet Tasker, the SBA's deputy associate administrator of capital access.

Ms. Tasker said the changes to Community Express are a result of the Justice Department's shift away from programs with gender and ethnicity eligibility criteria.

Also starting Oct. 1, the maximum interest rate lenders may charge is to be aligned with the SBA's biggest program, its 7(a) loans. That means prime plus 2.25% for loans longer than seven years and prime plus 2.75% for shorter-term loans.

Currently lenders are allowed to charge 4.5% over prime for loans larger than $50,000 and 6.5% over prime for loans less than $50,000.

The reduction is not expected to sting because many lenders already apply the 7(a) rate to Community Express loans, according to industry trade association representatives.

The SBA also has decided to let lenders use its online financial literacy program to fulfill the agency's requirement to provide training on running a business.

Community Express was started nine years ago, but the SBA still treats it as a pilot program with a deadline. Last month the agency extended its deadline to Dec. 31, 2009.

The SBA guarantees 75% to 85% of Community Express loans up to $250,000, and lenders may use their own documents. As of July 11 there were 6,691 of these loans, totaling almost $179 million. The average loan size is $35,000.

The program is so popular that earlier this year the SBA had to ask lenders to scale back volume because it was exceeding its limits.

Industry watchers said they are glad the SBA decided to continue Community Express, especially with the economy putting earnings pressure on banks.

"The important thing with the SBA loan programs is you need a variety of loan programs," said Paul Merski, the chief economist with the Independent Community Bankers of America.

Bob Seiwert, the senior vice president who heads the American Bankers Association's Center for Commercial Lending and Business Practices, said he thinks bankers will support what appears to be a broadening of Community Express. But until the final details are released, he said, it will be difficult to say what impact the changes will have.

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