This article delves into the historical background of the SBLC program, examines the current loan activity and notable trends, and explores the upcoming changes to the program. The SBLC program, which has remained largely unaltered for more than four decades, is undergoing significant developments that are worth discussing. By shedding light on the program’s history, loan activity, and impending modifications, this article provides a comprehensive overview of the SBLC program and its evolving landscape.
New SBLCs added in 2023
As of November 1, 2023, the SBA has issued three new Small Business Lending Company (SBLC) licenses to lenders concentrating on historically underserved markets. This marks the initial expansion of the SBLC program in over four decades. The granted licenses to Arkansas Capital Corporation, Alaska Growth Capital BIDCO, Inc., and Funding Circle signify a pivotal step in supporting the SBA’s continuous initiatives to enhance access to affordable capital for business owners in underserved markets nationwide. This aligns with the White House’s commitment to advancing equity and fostering an inclusive economy.
1. Arkansas Capital Corporation, a community development finance institution (CDFI) established in 1957, has deployed over $2.34 billion in capital to small businesses and economic development projects in Arkansas and neighboring states. With a focus on Persistent Poverty Counties since 2019, they aim to expand SBA lending to Mississippi, Tennessee, Oklahoma, Louisiana, Missouri, and Texas, covering nearly 40% of all persistent poverty counties nationwide.
2. Alaska Growth Capital BIDCO, Inc., operating as McKinley Alaska Growth Capital, is an Alaska-based Business and Industrial Development Corporation (BIDCO) and Native CDFI. Since 1997, they have provided small business loans and technical assistance, with over 60% of their efforts dedicated to Alaska Native, Native American, and Native Hawaiian businesses. The SBLC license will enable them to extend lending to underserved markets, starting with Hawaii, Washington, and Montana.
3. Funding Circle, a prominent online lending platform for small business financing, was founded in 2010 to address the credit gap for small businesses. Having originated over $4.5 billion in loans to 45,000 businesses, they focus on increasing access for underserved borrowers, with 33% of current loans in low-to-moderate income neighborhoods and 40% in rural areas. With an SBLC license, Funding Circle aims to further support small and underserved businesses by concentrating on loans under $150,000, well below the average SBA 7(a) loan size.
History of SBLC program
Small Business Lending Companies (SBLCs) are non-depository lending institutions authorized by the Small Business Administration (SBA) to make 7a loans and loans to intermediaries in the SBA’s Microloan program. SBLCs are lenders, but they are not banks.
In 1982, the Small Business Administration (SBA) granted 14 nonbank licenses as part of its initiative to expand the Small Business Lending Company (SBLC) program. These licenses were awarded to nonbank financial institutions, allowing them to participate in the SBA loan programs and provide financing to small businesses. Over time, the ownership and utilization of these licenses may have changed, but there have not been more licenses granted since the initial fourteen nonbank lenders received their licenses. Financial institutions holding these licenses could have undergone mergers, acquisitions, or other transformations, leading to potential shifts in the holders of the licenses. Some of these nonbank lenders may have continued to operate as independent entities, while others may have been absorbed into larger financial institutions or transformed their business models.
The 17 SBLCs 2023 SBA 7a loan activity
| 2022 Rank | 2023 Rank | SBLC Lender Name | Total Loan $ | # of Loans | % of Loans | Avg 7(a) Loan | Avg Interest | Jobs |
|---|---|---|---|---|---|---|---|---|
| 1 | 1 | Newtek | $841,951,600 | 1,764 | 51% | $477,297 | 11.8% | 27,715 |
| 2 | 2 | Readycap Lending | $512,297,900 | 1,075 | 31% | $476,556 | 11.9% | 10,093 |
| 7 | 3 | Lendistry | $52,134,000 | 190 | 5% | $274,389 | 12.2% | 1,828 |
| 3 | 4 | Harvest SB Finance | $193,064,500 | 175 | 5% | $1,103,226 | 10.6% | 2,356 |
| 5 | 5 | Fund-EX Solutions | $137,192,600 | 90 | 3% | $1,524,362 | 10.9% | 1,293 |
| 4 | 6 | VelocitySBA | $99,449,700 | 77 | 2% | $1,291,555 | 10.9% | 1,149 |
| 8 | 7 | Centerstone SBA Lending | $55,346,800 | 35 | 1% | $1,581,337 | 10.3% | 506 |
| 10 | 8 | Exos Small Business Lending (fka Immito) | $45,605,000 | 33 | 1% | $1,381,970 | 11.1% | 861 |
| 9 | 9 | First Westeren SBLC | $45,895,000 | 20 | 1% | $2,294,750 | 9.7% | 235 |
| — | 10 | Alaska Growth Capital BIDCO, Inc | $16,015,800 | 13 | 0% | $1,231,985 | 11.2% | 257 |
| — | 11 | Arkansas Capital Corporation | $2,492,100 | 9 | 0% | $276,900 | 10.9% | 43 |
| — | 12 | Funding Circle | No Activity (1) | |||||
| — | 13 | Capital Spring SBLC | No Activity | |||||
| — | 14 | Loan Source | No Activity | |||||
| 6 | 15 | Fountainhead SBF | No Activity | |||||
| — | 16 | Unknown | ||||||
| — | 17 | Unknown | ||||||
| SBLC Subtotal | $2,001,445,000 | 3,481 | 100% | $574,963 | 46,336 | |||
| All SBA Loans approved in 2023 | $22,176,167,800 | 47,014 | 479,640 | |||||
| SBLC % of All SBA Lending | 9.0% | 7.4% | 9.7% |
The 14 SBLCs 2022SBA 7a loan activity
| Rank | SBLC Name | Total Loan $ | # of Loans | % of SBLC | Avg 7a Loan | Avg Interest | Jobs |
|---|---|---|---|---|---|---|---|
| 1 | Newtek Small Business | $680,803,700 | 1,034 | 45% | $658,418 | 7.6% | 15,597 |
| 2 | Readycap Lending | $370,488,200 | 796 | 34% | $465,437 | 7.7% | 5,276 |
| 3 | Harvest Small Business | $229,319,200 | 207 | 9% | $1,107,822 | 6.7% | 2,655 |
| 4 | VelocitySBA | $86,577,500 | 77 | 3% | $843,287 | 6.4% | 707 |
| 5 | Fund-Ex Solutions Group | $107,497,100 | 74 | 3% | $1,452,664 | 6.7% | 1,221 |
| 6 | Fountainhead | $48,955,000 | 43 | 2% | $853,866 | 7.4% | 686 |
| 7 | Lendistry SBLC | $13,096,300 | 33 | 1% | $396,858 | 7.7% | 592 |
| 8 | Centerstone SBA Lending | $33,923,500 | 31 | 1% | $1,094,306 | 6.0% | 385 |
| 9 | First Western SBLC | $35,309,000 | 19 | 1% | $1,858,368 | 6.1% | 276 |
| 10 | Immito | $9,479,000 | 8 | 0% | $1,184,875 | 6.8% | 104 |
| 11 | Capital Spring SBLC | No activity | |||||
| 12 | Loan Source | No activity | |||||
| SBLC Subtotal | $1,615,448,500 | 2,322 | 100% | $695,714 | 7.3% | 27,499 | |
| All SBA Loans approved in 2022 | $20,206,225,500 | 35,065 | $576,251 | 6.8% | 371,107 | ||
| SBLC % of All SBA Lending | 8.0% | 6.6% | 7.4% |
1) Newtek Small Business Finance – Newtek is a well-established SBLC and ranked first in terms of the number of SBA 7(a) loans issued in 2023 with a total of 1,764 loans. They provide comprehensive financial solutions for small businesses, including SBA loans, business consulting, payroll management, and insurance solutions. Newtek’s commitment to supporting small businesses extends beyond financing, making them a valuable resource for entrepreneurs seeking holistic support.
2) Readycap Lending – Readycap holds the second position, issuing 1,075 SBA 7(a) loans in 2023. They are a reputable SBLC specializing in providing SBA loans to small businesses. Readycap offers a variety of loan programs, including 7(a) and 504 loans, to support business expansion, working capital needs, and equipment purchases. They are known for their efficient loan processing and commitment to exceptional customer service.
3) Lendistry SBLC- Lendistry holds the third position, issuing 190 SBA 7(a) loans in 2023. They are a dedicated SBA SBLC focused on providing inclusive financing solutions for underserved small businesses. Lendistry leverages their expertise in SBA lending to provide accessible capital options and support the success of small businesses. Lendistry acquired its SBLC license from Hana Small Business Lending in 2018.
4) Harvest Small Business Finance – Harvest Small Business Finance secured the fourth position by issuing 175 SBA 7(a) loans in 2023. They specialize in financing options for commercial real estate and small businesses. Harvest Small Business Finance provides tailored loan solutions, specifically SBA 504 loans, to help businesses acquire properties and grow their operations. They have extensive expertise in the commercial real estate sector.
5) BHG, dba Fund-Ex Solutions Group – Fund-Ex Solutions Group takes the fifth spot, issuing 90 SBA 7(a) loans in 2023. They offer a range of SBA-backed loan programs tailored to different industries and business needs. Fund-Ex Solutions Group is dedicated to simplifying the lending process and providing quick access to capital for small businesses.
6) VelocitySBA – VelocitySBA ranks sixth, issuing 77 SBA 7(a) loans in 2023. They focus on empowering small businesses through SBA loans and offer a range of SBA-backed financing options, including 7(a) and 504 loans. VelocitySBA is known for their commitment to exceptional customer service and providing competitive rates. They leverage their extensive knowledge of SBA programs to help small businesses secure the funding they need.
7) Centerstone SBA Lending – Centerstone SBA Lending ranks seventh with 35 SBA 7(a) loans issued in 2022. They are a trusted SBLC that specializes in providing SBA loans. Centerstone focuses on understanding the unique needs of each business and tailoring loan solutions accordingly. With their extensive experience in SBA lending, Centerstone has built a strong reputation for their expertise and personalized approach.
8) Exos Small Business Lending (fka Immito) – Exos ranks eighth with 33 SBA 7(a) loans issued in 2023. Exos is an SBA SBLC dedicated to helping small businesses thrive through SBA-backed financing. They offer customized loan solutions to meet the specific requirements of entrepreneurs and aim to simplify the lending process for quick access to capital.
9) First Western SBLC – First Western SBLC secures the ninth position with 20 SBA 7(a) loans issued in 2022. They specialize in providing SBA loans to small businesses, including loan programs such as 7(a) and 504 loans. First Western SBLC aims to be a trusted partner for small business owners, offering personalized loan solutions and expertise to help them achieve their goals.
10) Alaska Growth Capital BIDCO – Alaska Growth Capital comes in tenth with 13 SBA 7(a) loans issued in 2023. Alaska Growth Capital is one of the three nonbank lenders to be issued an SBLC license in 2023 by the SBA.
11) Arkansas Capital Corporation – Arkansas Capital comes in eleventh with nine SBA 7(a) loans issued in 2023. Arkansas Growth Capital is one of the three nonbank lenders to be issued an SBLC license in 2023 by the SBA.
Various notes regarding other SBLC with no loan activity in 2023:
Funding Circle just had its SBLC application approved by the SBA in April of 2024. Rumors are circulating that due to the high capital requirements of being am SBLC nonbank lender, Funding Circle may not utilize its SBLC license to make loans directly to borrowers but rather continue its current business model of partnering with traditional banks to make SBA loans.
Fountainhead sold off its SBA assets to Crossroads Systems in December of 2021. Since then, Crossroads has not made any SBA 7(a) loans.
Capital Spring SBLC – Capital Spring SBLC, acquired by Gulf Coast Bank & Trust in 2017, no longer holds an SBLC license.
The Loan Source – The Loan Source has not made any SBA 7a loans since making 3 loans in 2019.
We do not have information on which lenders hold the other two SBLC licenses.
SBLC loan activity by year
The data show that over the past six years most of the growth of SBLC SBA lending has come from three lenders: Newtek, Readycap, and Harvest. Since 2021, virtually all growth in SBLC lending has come from Newtek and Readycap.
SBLC market share
As a result of their market share gains over the past few years, the top 4 SBLCs comprise 95% of all the loans issued last year by nonbank lenders:
The top 4 SBLCs market share by aggregate loan amount is a whopping 93%:
The number of SBLC SBA loans dipped slightly during Covid, rebounded, and then dipped again in 2022:
SBLC expansion
The SBA has acknowledged the significance of expanding the SBLC program and has decided to limit the issuance of nonbank licenses to three for this year. The deadline for applications for new SBLC licenses is set for July 31, 2023.
The American Bankers Association (ABA) expressed concerns to Congress on May 17, 2023, regarding the rollout of new SBLCs. Firstly, they are worried that the new SBLCs, similar to the existing ones, do not have any requirements to cater to underserved borrowers or provide small-dollar loans, potentially hindering mission lending.
Secondly, the ABA highlighted that the SBA has not implemented any regulatory requirements for the new SBLCs that mirror the federal regulatory and compliance standards imposed on depository institutions supervised by a Federal banking agency.
Additionally, there are concerns about the SBA’s Office of Credit Risk Management (OCRM) operating at its maximum capacity due to existing responsibilities, low staffing, and limited resources. This may impede the OCRM’s ability to provide adequate oversight with its current budget.
Several members of Congress, including Senators Ben Cardin, Joni Ernst, Richard Durbin, and Tammy Duckworth, have conveyed their worries to the SBA. They believe that relaxing the underwriting standards by allowing lightly regulated fintechs into the 7(a) lending program could potentially result in fraud and abuse, as experienced during the PPP program.
Darren King
Founder of SBALenders.com, which has assisted thousands of entrepreneur navigate SBA lending. Over three decades of experience in finance and accounting helping small businesses make the right financial decisions and obtain the right capital structure for their businesses. Experience as managing partner of a venture capital firm investing in early-stage small businesses, CEO of a cloud service provider (Hosting.com), CFO for numerous startups, angel investor, and audit, tax, and valuation experience at a public accounting firm. Indiana University Kelley School of Business high distinction graduate.
