SBA Announces Termination of Community Advantage Pilot Loan Program | Practical Law

SBA Announces Termination of Community Advantage Pilot Loan Program | Practical Law

The US Small Business Administration (SBA) issued a notification that it is terminating its Community Advantage pilot loan program on October 31, 2023. The SBA introduced this program in February 2011 as part of the loans it guarantees under Section 7(a) of the Small Business Act with the intention of assisting small businesses in underserved markets.

SBA Announces Termination of Community Advantage Pilot Loan Program

Practical Law Legal Update w-040-9483 (Approx. 3 pages)

SBA Announces Termination of Community Advantage Pilot Loan Program

by Practical Law Finance
Published on 04 Oct 2023USA (National/Federal)
The US Small Business Administration (SBA) issued a notification that it is terminating its Community Advantage pilot loan program on October 31, 2023. The SBA introduced this program in February 2011 as part of the loans it guarantees under Section 7(a) of the Small Business Act with the intention of assisting small businesses in underserved markets.
On October 5, 2023, the US Small Business Administration (SBA) published in the Federal Register a notification that it is terminating its Community Advantage pilot loan program (CA program).
The CA program will terminate on October 31, 2023.
The SBA introduced the CA program in February 2011 as part of the loans it guarantees under Section 7(a) of the Small Business Act (15 U.S.C. § 636(a)) (7(a) loans). The CA program's intention has been to assist small businesses in underserved markets.
The SBA is terminating the CA program because its evaluation of the CA program indicates:
  • An unclear record on job creation and retention and on business creation and expansion.
  • Higher administrative and subsidy costs (as indicated by hours spent on counseling and the riskiness of loans under the CA program (CA loans)).
  • The performance of the CA loan portfolio, as measured by the following, compares unfavorably with other 7(a) loans:
    • early loan problem rates (that is, the percentage of the gross amount of CA loans in place for 36 months or less with a deferred, delinquent (that is, at least 60 days past due), liquidated, purchased, or charged off status within 18 months of disbursement);
    • default rates; and
    • Small Business Risk Portfolio Solution (SBPS) scores, which assess the likelihood of debt delinquency in the next 12 to 24 months.
In addition, since May 2023, a lender authorized to make CA loans and licensed by the SBA as a Community Advantage Small Business Lending Company (CA SBLC) may make 7(a) loans under a program with no expiration date (see Legal Update, SBA Lifts Small Business Lending Company Moratorium, Creates New Small Business Lending Company Type, and Removes Loan Authorization Use: CA SBLCs).
For more information on the CA program, see Practice Note, Small Business Administration (SBA) 7(a) Loans.