Agency Reinstates Robust Loan Criteria to End Era of Irresponsible Lending
WASHINGTON, April 22, 2025 (GLOBE NEWSWIRE) — Today, the U.S. Small Business Administration (SBA) announced it will eliminate a package of Biden-era policies which dramatically reduced underwriting standards within the 7(a) loan program, sacrificing its financial integrity and driving up taxpayer liability. Under the leadership of Administrator Kelly Loeffler, the SBA is restoring robust rules to end the era of reckless lending – preserving access to capital for America’s small business owners and safeguarding taxpayer dollars.
“The last Administration inherited a thriving 7(a) loan program but left it in critical condition – dismantling every common-sense guardrail that kept it solvent and self-sustaining,” Administrator Loeffler said. “From slashing lender fees to destroying underwriting standards, Biden’s reckless policies have triggered a surge in defaults which now threatens the viability of the program along with its risk to taxpayers. Therefore, the SBA is taking immediate action to restore prudent lending criteria, rein in risk, and save the 7(a) program before it collapses under the weight of bad policy.”
As the flagship SBA loan, the 7(a) loan guaranty provides government-backed capital through private lenders for qualified small businesses unable to borrow elsewhere. By statute, it is required to operate at “zero-subsidy,” or zero cost – and historically pays for itself through lender fees, which cover the costs of any borrower defaults.
Despite this mandate, the Biden Administration eliminated lender fees. It simultaneously adopted an underwriting standard known as “Do What You Do,” which erased longstanding lending criteria within the 7(a) loan program and enabled lenders to approve underqualified borrowers for government-guaranteed loans. Predictably, the program saw a massive rise in defaults and delinquencies – which the agency was unable to cover due to decreased fee income. By 2024, the 7(a) loan program had a negative cash flow of about $397 million – the first instance of negative cashflow in 13 years.
Last month, the SBA took aggressive action to stop the bleeding and restore lender fees within the 7(a) loan program. The new SOP 50.10.8, announced today, will reject the “Do What You Do” underwriting rules and revert lending criteria to the heightened pre-Biden standards. Additionally, the new rule will reinstate and streamline the Franchise Directory to help lenders determine whether certain businesses are eligible to receive an SBA loan.
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About the U.S. Small Business Administration
The U.S. Small Business Administration helps power the American dream of entrepreneurship. As the leading voice for small businesses within the federal government, the SBA empowers job creators with the resources and support they need to start, grow, and expand their businesses or recover from a declared disaster. It delivers services through an extensive network of SBA field offices and partnerships with public and private organizations. To learn more, visit www.sba.gov.
CONTACT: SBA HQ Press Team U.S. Small Business Administration press_office@sba.gov
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