SBA Overhauling Biden-Era Loan Program Following High Default Rates

"The Small Business Administration (SBA) is overhauling a Biden-era lending initiative, citing its “alarmingly high rates” of loan default, the agency said in a May 19 statement.

The Community Advantage Small Business Lending Company program was designed to issue 7(a) loans to “underserved communities,” the SBA said. In the 7(a) loan program, the government offers loan guarantees to lenders, which allows the loan providers to advance credit to small businesses with special needs.


The SBA blamed Community Advantage’s high default rate on lax oversight of the program.

“Community Advantage generated a 7 percent default rate over the last 12 months—more than double that of the overall 7(a) loan portfolio,” it said.

“Additionally, the portfolio is disproportionately stressed, with multiple lenders generating early problem loan rates above 30 percent.”

A problem loan refers to any loan that cannot be recovered from borrowers quickly.

Existing lenders have to “dramatically increase” their capital reserves to continue participating in the program.

SBA administrator Kelly Loeffler called Community Advantage an example of the weaponization of government programs to “tip the scale against deserving small businesses and toward preferred groups and political allies, even when it meant greater risk to American taxpayers"

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