The May 5th, 2023 edition of the Phoenix Business Journal put a spotlight on the current high interest rates. With some lenders becoming cautious along with economic uncertanty, small businesses are facing a lot of questions about their financial strategy in 2023. The Phoenix Business Journal reached out to several banking leaders in the Valley to offer their perspectives, insights, and guidance regarding their best practices, tips, and how the banking industry's "turmoil" will affect businesses in the coming months.
How will financing options change for small businesses in the current economic environment?
Thomas Inserra, Founder and CEO of Integro Bank, "Interest rates are higher. That's a fact at all banks, but there's an enhanced interest in SBA-government loans because even though interest rates may be higher, you can amortize it over a longer period, which makes it more affordable because the monthly costs can go down. It's an attractive feature that provides a little more flexibility in underwriting and approving loans because the SBA program is specifically designed to help small businesses. We're a big SBA lender and we're seeing more interest in those types of loans."
The Government appears to share Mr. Inserra's perspective on recognizing the enhanced interest of SBA-government loans. In a media release on Thursday, May 11, the U.S. Small Business Administration (SBA) announced program improvements that will expand access to capital for small businesses, especially small-dollar loans, and increase protection against fraud as part of rulemaking finalized in April.
SBA recognizes that small businesses, particularly those owned by individuals in underserved communities who are highly entrepreneurial, still face longstanding barriers in accessing capital needed to start or grow their businesses.
To that end, building on the newly finalized rules, SBA announced publicly, for the first time, its plans to:
Streamline eligibility determination of SBA-backed loans. To reduce the burden on SBA lenders and streamline operations, SBA will bring eligibility determination on SBA loans in-house through new technology starting August 1, 2023, which will ensure more lenders can focus on their customers and expand capacity to increase lending, especially small-dollar lending.
Add new fraud review on all loans. Building on President Biden’s commitment to root out fraud, the SBA will use advanced data analytics, third party data checks, and artificial intelligence tools for fraud review on all loans in the 7(a) and 504 Loan Programs prior to approval, starting August 1, 2023. To date, loan approval in these programs has largely been delegated to lenders, who approve loans based on SBA rules but without the agency checking for indicators of fraud upfront.
“These new changes are an important step toward ensuring that more small business owners have the opportunity to grow and succeed,” said Associate Administrator Patrick Kelley. “Building on controls deployed under the Biden-Harris Administration, SBA will safeguard taxpayer dollars, protect the integrity of our programs, and simplify the application process for both lenders and small business owners – a win-win for everyone.”