View Rule

SBA plans to issue a proposed regulation for the SBA Express loan program, codified in section 7(a)(31) of the Small Business Act. The SBA Express loan program reduces the number of Government mandated forms and procedures, streamlines the processing and reduces the cost of smaller, less complex SBA loans. Particular features of the SBA Express loan program include: (1) SBA Express loans carry a maximum SBA guaranty of 50 percent; (2) SBA Express lenders use, to the maximum extent practicable, their own documentation, analyses, policies and procedures; and (3) a response to an SBA Express loan application will be given within 36 hours. SBA also plans to propose regulations for the Export Express Program codified at 7(a)(35) of the Small Business Act. The Export Express Program, made permanent by the Small Business Jobs Act, makes guaranteed financing available for export development activities.  SBA continues to explore the economic feasibility of the RISE After Disaster Act of 2015 Recovery Opportunity Loan Program.  

Overall Description of Deadline: Section 2106 requires SBA to promulgate rules to carry out the Recovery Opportunity Loan Program not later than 270 days (August 21, 2016) after enactment of the RISE After Disaster Act of 2015.

Statement of Need:

This action is necessary to provide regulatory guidance for SBA Express and Export Express loans authorized by statute.  Current regulatory guidance provides an extensive framework for the delivery of SBA’s 7(a) guaranteed loans through participating private sector lenders. In general, the requirements add time and expense for lenders who must comply first with their primary regulator rules, and then consider the additional burden of any SBA program requirements.  The required use of certain SBA mandated forms is in many cases redundant, increasing costs for lenders to deliver loans to small businesses. For the SBA Express and Export Express 7(a) loans Congress has authorized SBA to reduce specific requirements and instead permit lenders on small dollar loans ($350,000 or less for SBA Express and $500,000 or less for Export Express) to apply many of their conventional underwriting rules and to use their own documentation.  This regulation will detail the reduced requirements for these guaranteed loans. It is necessary to provide clear and succinct regulatory guidance for lenders to encourage participation in extending smaller dollar loans, and to ensure their ability to comply, and extend credit with confidence in their ability to rely on payment by SBA of the guaranty if necessary.  

Summary of the Legal Basis:

The SBA Express loans are authorized in Section 7(a)(31) of the Small Business Act and Export Express loans were made permanent by the Small Business Jobs Act and are authorized in Section 7(a)(35) of the Small Business Act. 

Alternatives:

The SBA has provided guidance on the SBA Express and Export Express loans in SOP 50 10 Lender and Development Company Programs. 

Anticipated Costs and Benefits:

While the number of lenders and loans should increase, SBA anticipates no additional cost from this regulatory action because the Express programs have been in use and performing for over 5 years.  Portfolio performance including prepayment, default and recovery behaviors is already being captured in the 7(a) program’s annual subsidy calculation. 

Lenders who participate in the SBA Express program agree to accept a lower guaranty of 50 percent on loans of $350,000 or less in return for delegated authority and the ability to use forms, procedures and policies that they already follow for similarly sized non-SBA guaranteed commercial loans.  This removes the additional layer of documents and permits a lender to move more quickly to a decision and funding of small dollar small business loans.  Cost to deliver is an important consideration for lenders when assessing the benefits of participating with SBA programs.  Streamlined rules result in increased lender participation, particularly for community banks, credit unions and other mission based lenders who generally serve more of rural communities and underserved populations with small loans. While SBA does not have specific statistics, cost savings to the lender generally trickle down to the small business applicant. Further, providing plain language regulatory guidance for the SBA Express program will reduce improper payment risk for lenders and SBA, by ensuring that lenders are fully informed and understand the program requirements.

 The Export Express program provides lenders with a 75-90 percent guaranty, as well as the authority to use their own forms, procedures and policies to the extent possible to reduce redundancy in documentation, time and costs associated with underwriting export loans up to and including $500,000.  

Risks:

The risk of not having regulations may impact the number of improper payments and/or denial of guarantee for lenders due to misinterpretation of program requirements.