SBA https://www.sba.gov Administrator Isabella Casillas Guzman highlighted the impact of SBA’s Equity Action Plan on small businesses.
The goal is to break down longstanding barriers to ensure underserved entrepreneurs can access capital, networks, resources, and opportunities related to their businesses.
There is a gap in access to capital among small business owners which contributes to racial inequities as these small businesses are likely to be from underserved communities and are more likely to have thin consumer and business credit files.
SBA’s Equity Action Plan is going to improve access to capital, remove barriers, bridge financial gaps through smart tools and resources, re-engineering loan programs, and build strong relationships with community leaders such as Community Development Financial Institutions, etc.
Community Financial Institutions (CFI), including Community Development Financial Institutions (CDFI) are private financial institutions that deliver responsible affordable finance to help people in underserved areas by mainstream finance.
CFIs can be limited due to factors such as their capital structure, challenges associated with hiring and retaining highly skilled lending officers, and the high cost of serving smaller dollar loans to small business owners with non-traditional profiles. This can limit CFIs in their connection to at-need borrowers and their capacity to generate significantly higher volume.
Also, SBA Programs such as LenderMatch and the Community Advantage Pilot do not optimize the marketplace to match CFIs and underserved borrowers. LenderMatch is an online platform matching potential borrowers to potential lenders offering SBA-backed funding and is being marketed to CFIs to reach underserved borrowers.. Community Advantage is a loan program designed to meet the credit and technical assistance needs of small businesses in underserved markets.
SBA will build on LenderMatch and Community Advantage and will invest in additional technology to optimize the marketplace to match underserved borrowers and CFIs, including CDFIs.
For borrowers, application requirements will be simplified, data will integrate automatically, and a high quality customer service support system will be available and be mobile friendly. By delivering the platform in a user friendly manner, borrowers can simply and seamlessly complete the process to mission-based lenders.
For CFIs, the platform’s automatic integration of data sources will make it possible to easily evaluate credit score alternatives. SBA will also invest in the marketing of the platform so all CFIs users can benefit and underserved borrowers can learn about the platform’s availability. SBA will also complete the CFI-borrower matching process in a way that generates a proposal, making the borrower assessment and underwriting process easier.
SBA expects by connecting more underserved small business owners to CFIs, the small business capital gap for underserved borrowers will decrease. The number of underserved small business owners that lack banking and/or debt history will decrease. The platform will increase the operational capacity for CRs which will increase CFI access and the use of SBA’s integrated platform and will result in more loans to underserved entrepreneurs.
Also SBA is going to improve government contracting opportunities for underserved small businesses, put additional backing behind their government contracting programs, and guide firms seeking self-certification as a Small Disadvantaged Business.
In addition, SBA is going to prioritize outreach efforts to underserved communities through the American Rescue Plan’s Community Navigators Pilot Program, as well as improve Women’s Business Centers, Veterans Business Outreach Centers, Field Operations Offices, plus enable resource partners to provide additional resources to help businesses start, grow and navigate challenges presented by the pandemic.
Go to https://sba.gov/about-sba/organization/aba-initiatives/sba-equity-initiative for information on the SBA Equity Initiative.