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The Small Business Administration (SBA) Wednesday issued a NAFCU-opposed final rule to amend SBA loan program regulations to lift the moratorium on licensing new small business lending companies (SBLCs) and add a new type of entity, called a “Community Advantage SBLC.”

In addition, the SBA removed the requirement for a loan authorization in 7(a) and 504 loan programs.

“NAFCU is disappointed to see the SBA ignoring the concerns raised by our members and more than 100 other stakeholders in its final SBLC rule,” said NAFCU President and CEO Dan Berger. “Main Street small businesses rely on SBA-backed loans to launch and expand their operations, but allowing unregulated fintechs to participate in these programs heightens fraud risks – as evidenced by the alarming results of the paycheck protection program – and is likely to increase program costs, which will result in higher fees for both lenders and small business borrowers and could place the 7(a) and Microloan Programs at existential risk. NAFCU firmly believes that credit unions represent the best and safest financial option for Americans, and we will continue to advocate for the SBA to safeguard the integrity of its essential programs from fraud-prone fintechs.”

NAFCU shared concerns with the rule when it was proposed, highlighting the risks that would be introduced to the 7(a) and microloan programs if unregulated, fraud-prone fintechs were given access. Additionally, although NAFCU supported the SBA’s efforts to increase access to lending in underserved communities, the association raised concerns that the Community Advantage SBLC program lacks the specificity and requirements necessary to achieve that goal.

NAFCU also raised concerns about another SBA proposal – which was finalized Tuesday – and called on the agency to pause both rulemakings to better understand the rules' separate and collective impacts.

The final rule takes effect May 12. NAFCU will issue a Final Regulation summary to break down the rule for members and will continue to engage the SBA to ensure the safety and soundness of credit unions’ ability to provide access to capital for Main Street small businesses