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INDUSTRY NEWS WIN $100 Kleen-Rite supplies, single color kit from Dr. Colorchip, PRO Products starter kit, Dynabrade accessories, Glassparency cleaners, Detailed Image gift card, AND MORE! Improvements made to expand access to capital for small businesses Following the recent finalization of two new rules aimed at closing gaps in capital access for America’s small business owners, Administrator Isabella Casillas Guzman, head of the U.S. Small Business Administration (SBA) and the voice for America’s 33 million small businesses in President Biden’s Cabinet has announced streamlined lender procedures and other details on implementation, according to a May 11 press release. "The Biden-Harris Administration recognizes that small businesses are the drivers of our economy, and that to participate in the opportunities created by the President’s Invest in America agenda, that they need capital to start, grow, and be resilient,” said Administrator Guzman in the press release. “The ongoing modernization of SBA’s loan programs will help ensure more borrowers can get funded through a broader network of lenders so they can help build a strengthened American economy that innovates, manufactures and provides the products and services that make our lives better across Main Street.” The “Investing in America” agenda has created 12.7 million jobs and a small business boom of 10.5 million new business applications in 2021 and 2022, the press release stated. At the same time, SBA recognizes that small businesses, particularly those owned by individuals in underserved communities who are highly entrepreneurial, still face longstanding barriers in accessing the 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 in the press release. The SBA will also offer: • New, simplified guidelines for lenders on how to make SBA loans, as part of a new Standard Operating Procedure (SOP). Under the new rules, SBA lenders will now be able to use their existing credit policies for similarly sized non-SBA loans up to $500,000. This will expand the number of credit-worthy business owners who can access SBA loans, especially small-dollar loans. • New procedures cutting red tape, as outlined in a Procedural Notice removing the requirement for a Loan Authorization, a set of forms that has become duplicative and unnecessary for lenders. • Details simplifying and clarifying affiliation standards to ease the burden on small business owners and lenders, and make clear who qualifies for an SBA loan, as part of a new Informational Notice. • SBA will continue to post updates in the coming days, including: • A notice to accept new lender applications in the Small Business Lending Company (SBLC) program. This will allow the existing program to provide loans to an expanded number of small businesses. SBA will accept applications beginning June 1 until July 31. SBA will name up to three new SBLCs. • Additional, simplified lender guidelines, including on lender participation, servicing, and liquidation. • The 7(a) and 504 loan programs are the most popular loan programs offered by SBA, the press release stated. The 7(a) Loan Program provides flexible financing options for a variety of business purposes, including capital and equipment purchases. The 504 Loan Program allows small businesses to finance fixed assets such as real estate, in addition to equipment. Both programs are designed to meet the needs of small business owners with low-cost and long-term capital. In Fiscal Year 2022, the two programs provided a combined $35 billion in capital to 57,000 American small businesses. 12 | AUTO DETAILING NEWS | VOL. 8, NO. 2 • SUMMER 2023
INDUSTRY NEWS Owners are stressed thanks to the small business credit crunch The small business credit crunch is no joke. “Borrowing for small businesses was already constrained due to rising interest rates,” according to an Associated Press report from April 11. The recent collapses of Silicon Valley Bank and Signature Bank, didn’t help matters and now it looks like other banks are being “forced to tighten credit further, since they’re seeing an outflow of deposits, which means they need to retain capital,” the story said. According to Ray Keating, chief economist for the Small Business & Entrepreneurship Council, “It’s hard to read how severe this is going to be, but it’s certainly going to be significant and when you look at how things play out, small businesses are hit the hardest.” And, according to the latest Biz2Credit Small Business Lending Index released in February, the approval rates of small business loan requests at big banks have fallen for nine consecutive months, the Legend Ad Auto Detailing News.pdf 1 5/24/21 5:12 PM story said. Only 14.2 precent of credit applications were approved by larger banks in February. Two years ago, the approval rate was at 28.3 percent. The story said that the Federal Reserve will hike interes rates in order to slow down the economy and ease inflation. Rohit Arora, CEO and co-founder of Biz2Credit, said that small businesses will be left in the lurch. According to an April 10 Reuters report, “By raising the benchmark interest rate that banks use in lending money to each other, tighter monetary policy makes consumer and business loans more expensive and harder to get. In theory, that lowers demand for credit-financed goods and services, and in time also lowers inflation.” Thankfully, the worst seems to have been avoided, stated the Reuters story. “Emergency steps by the Fed and Treasury Department protected depositors at both banks, helping ease what could have been a destabilizing run from smaller banks to larger ones. Other actions by the Fed helped maintain confidence in the wider banking system.” The response - less lending, tighter credit standards and higher interest on loans - was already taking shape. Officials are now watching for signs that has been kicked into overdrive. According to the story, Matthew Luzzetti, chief U.S. economist for Deutsche Bank, recently estimated if the next Fed loan officers survey shows a 10-percentage-point rise in the share of banks tightening credit, it could lop about half a percentage point from U.S. output - enough to turn expected meager growth into a recession. "These scenarios would push lending conditions into a range that has more clearly been associated with recession," Luzzetti and his team wrote, according to Reuters, saying they see potential for "a broader tightening of financial conditions that will meaningfully slow growth at a time when recession risks were already elevated." But…there’s some good news…. According to a more recent report from Keating, the latest Consumer Price Index (CPI) report from the U.S. Bureau of Labor Statistics showed that inflation ran at a mere 0.1 percent in March. “That’s welcome news,” he stated. For the 12-month period ending in March, CPI inflation ran at 5.0 percent, which was the slowest 12-month pace since the period that ended in March 2021, he stated. “If we look at the past nine months, the news improves, as the annualized inflation rate over that period registered approximately 3.2 percent. Indeed, as made clear in the following chart from the BLS report, inflation took a major step down starting in July of last year.” C M Y CM MY CY CMY K LEGEND A Premium Coating Experience psdetailproducts.com VOL. 8, NO.2 • SUMMER 2023 | AUTO DETAILING NEWS | 13
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