The Surprising Way SBA Policy Drives Digital Borrowing
When the SBA tightens its lending standards, the demand for small business loans doesn’t just evaporate.
Good morning!
Here are today’s highlights:
The courts have ruled that you can’t copyright an AI-generated design.
The Court of International Trade has told the Trump administration to start the refunds.
Meanwhile, the Trump administration says its new 10-percent global tariff will leap to 15 percent next week.
Gene Marks says you should abide by pay-transparency laws even in states that don’t have them.
FINANCE
Ami Kassar explains how the SBA, by tightening its lending standards, is closing an exit ramp for businesses caught in the alternative-lending loop: “As underwriting tightened within the SBA program, refinancing merchant cash advances and certain factoring arrangements with SBA proceeds became more difficult. Recently, the SBA went further, prohibiting lenders from refinancing merchant cash advances and certain factoring agreements with SBA loan proceeds. Policymakers understandably do not want taxpayer-backed loans used to absorb high-cost private risk. From a program integrity standpoint, the rationale is clear: the SBA must protect taxpayers and strengthen its own credit quality. For borrowers, however, the consequences are complicated.”
“The new prohibition creates a hard stop where lenders once had flexibility. If a business with short-term obligations needs capital and cannot use SBA proceeds to refinance those obligations, the practical alternative is often to remain within the alternative lending ecosystem. Renewals follow. Stacking increases. Cash flow tightens further.”
“The policy may reduce certain categories of SBA defaults in the near term. But it may also increase the number of businesses that never regain eligibility for disciplined, long-term credit. When the exit ramp narrows, dependency deepens. And when dependency deepens, the collision between these two capital systems accelerates.”
“Credit quality can deteriorate upstream, long before an SBA application is submitted. Protecting the SBA in a vacuum does not insulate it from the ecosystem surrounding it.” READ MORE
