What is an SBA Community Advantage Small Business Lending Company?

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The need for accessible traditional small business loans is undeniable, especially in underserved communities. The Federal Reserve System’s 2024 Firms in Focus data revealed that 56 percent of white entrepreneurs who applied for financing were fully approved, while less than 35 percent of minority applicants were fully approved.

The U.S. Small Business Administration (SBA) designed the Community Advantage (CA) loan to bridge this gap. But this was a pilot program that sunsetted on October 31, 2023. To create a permanent solution, the SBA established licensing for Community Advantage Small Business Lending Companies (CA SBLCs). Many of these SBLCs transitioned directly from the temporary pilot program, while an additional coterie who didn’t participate in the pilot secured this license. Today, more than 140 lending institutions have SBLC licensing, positioning them to help businesses in underserved communities.

Let’s review what a Community Advantage Small Business Lending Company is and how lenders can participate in this program.

What is an SBA Community Advantage Small Business Lending Company?

In 2023, the SBA opted to change its rules, lifting the moratorium on SBLCs and introducing the Community Advantage Small Business Lending Company (CA SBLC). An SBLC is a specialized lender approved by the SBA to administer regular SBA 7(a) loans with a focus on helping small businesses in underserved markets.

CA SBLCs aim to expand access to capital for underserved communities, including women, minorities, veterans and people in low-income areas. Certain lending requirements limit access to traditional small business financing, but by focusing solely on credit score, business cash flow and collateral, these lenders can approve loans for underserved communities at a higher rate.

As part of the permanent program the SBA accepted a round of applications for new CA SBLCs between June 1, 2023 and July 31, 2023 and between September 2, 2024 and December 20, 2024. The SBA hasn’t issued information about any future rounds that will be open, although that previous schedule suggests it may open a new round later in 2025.

SBA CA Small Business Lending Company vs. SBA Small Business Lending Company

Both CA SBLCs and SBA Small Business Lending Companies (SBLCs) aim to support small businesses by making SBA loans, but the two lenders differ when it comes to licensing.

As an SBA SBLC, the lender can provide small businesses access to SBA loans, specifically 7(a) loans. SBA SBLCs can also provide loans to intermediaries that provide SBA microloans, which are smaller loans under $50,000. Applications for the SBA SBLC license are closed, but when a lender is approved for this license, they have the power to make more significant loan amounts because they utilize government guarantees in underwriting, which lowers risks for lenders as well as costs for borrowers.

A CA SBLC license is designed for Community Advantage lenders targeting businesses in underserved communities. These are CA lenders who participated in the CA Pilot Program on a temporary basis making SBA Community Advantage loans, ones who joined when the program was transitioning to its current permanent status or ones who applied and were approved during previous open application periods. With this license, they will have permanent authority to make regular 7(a) loans of up to $350,000 to small businesses in underserved markets.

How to become an SBA Community Advantage SBLC

Currently, the SBA is not accepting new applications for CA SBLCs. Lending institutions interested in securing this type of license should watch for the SBA to publish notice of a new round on the Federal Register. Historically, those notices have been titled “Small Business Lending Company Application Process.”

Community Advantage SBLC requirements

All lenders interested in becoming CA SBLCs must adhere to the SBA’s specific rules and guidelines. That includes operating as a nonprofit and as one of the following types of organizations:

• Certified Development Companies (CDCs)
• Community Development Financial Institutions (CDFIs)
• Intermediary Lending Pilot (ILP) program Intermediaries
• Microloan program intermediaries

More details about the current CA SBLC requirements, from what needs to be in the lending institution’s application to the required bond coverage, get included in each Federal Register publication announcing the application process.

• SBA underserved communities

  • Low-to-moderate income (LMI) areas
  • Rural areas
  • Opportunity Zones
  • Promise Zones
  • Empowerment Zones and Enterprise Communities (EZ/EC)
  • Historically Underutilized Business Zones (HUBZones)

  • Businesses in operation for under two years
  • Businesses with veteran ownership of 51 percent or more
  • Businesses in which over 50 percent of its full-time employees fall into the low-income category or live within LMI census tracts

Bottom line

When access to traditional small business loans is limited, Community Advantage Small Business Lending Companies can fill in the gaps. By applying to be a CA SBLC, lenders can provide access to capital and expand their support to businesses in underserved communities.

Frequently asked questions

• How can a lender become an SBA Small Business Lending Company?

  Becoming an SBA small business lending company (SBLC) requires the lender to purchase an existing SBLC or CA SBLC license or apply for a new SBLC or CA SBLC license during an open application period.

• Who is the top SBA lender?

  In 2024, Newtek Small Business Finance was the top SBA lender by total amount of approved loans, followed by Live Oak Bank and Huntington National Bank.

• Who is the largest non-bank SBA lender?

  Newtek Small Business Finance is the largest non-bank SBA lender. It’s a business development company rather than a bank.