The U.S. Small Business Administration (SBA) is seeking to expand access to capital for entrepreneurs by relaxing the underwriting criteria and streamlining the process.
Experts, however, advise financial chiefs to proceed cautiously, stressing the larger risks the looser standards carry.
The new rules, approved in August and effective now, generally expand the availability of small business loans and cut some of the requirements that companies must meet to qualify for them.
On the lender side, the SBA made it so a wider variety of entities such as fintechs can now offer these government-guaranteed loans.
On the borrower side, one of the key changes is the SBA’s move to raise the threshold above which borrowers must put up collateral to back the new debt to $50,000 from $25,000.
The changes do come at a cost because they’re expanding credit access to borrowers who may have questionable credit profiles, some experts say. Read more.