Small Business: SBA makes programs, lending easier for banks

Sam Jones is the Region VII administrator for the Small Business Administration.

The Bush Administration is changing the face of government to foster the growth of small business. I want to share just one change that has taken place at the U.S. Small Business Administration as it strives to meet the challenge of refocusing its efforts to better serve small-business owners.

Because loan guarantees are the major portion of our business, these guarantees of loans made by our partner lenders are our "product." We first started talking about how to improve our "product" so that more small-business owners could be extended credit at a national SBA Management Board meeting in May of this year.

I had the opportunity, along with SBA district directors and regional administrators from across the nation, to serve on a capital access task force. In preparation, I surveyed community banks with whom we do business, asking how we could better serve them and their customers. Banks doing no SBA lending were polled about their needs as well.

Three top ideas surfaced. They were:

SBA should streamline its loan guarantee application process;

Banks should have the ability to use their own documentation and underwriting procedures to gather credit information from borrowers and make lending decisions; and,

Loans should be closed using the banks' existing closing documents.

Prior to the capital access task force meeting, I shopped these suggestions to a number of the task force members by e-mail. We explored the many ideas that surfaced about possible changes to make an SBA loan product more user-friendly so that more lenders make our product available for small businesses.

A lively e-mail discussion was had and by the time the task force met, a consensus was forming. The task force recommended changing SBA procedures to create a new loan guarantee product, which became the expanded and enhanced SBA Express. Previously the SBA Express Loan Program was open only to SBA Preferred Lenders, typically larger banks. The changes make the SBA Express loan available to 2,400 more lenders across the nation by allowing smaller lenders including community and rural lenders previously making no SBA loans to participate.

The expanded SBA Express Loan product was on the street only six weeks after the task force met. But the immediate feedback was that some fine tuning was needed. Smaller community and rural lenders qualified to use the new program were balking at signing up because fees for a biennial SBA review required of the SBA Express Lenders was seen as burden for banks with a small SBA loan portfolio.

I relayed the initial lender response by e-mail to SBA headquarters and even volunteered the staff of the district offices in Region VII to do reviews without charge to the lender. Other regional offices quickly made similar offers.

I am proud to report that SBA has waived the review fees for lenders making fewer than 12 loans per year through the new SBA Express guaranteed loan program.

This is an example of what government can do if it remains customer-focused and responsive. I am proud that we at SBA are building an agency not only capable of handling the demands of the mega-banks, but which also cares about delivering services to its constituents in the heartland.