The U.S. Small Business Administration (SBA) has implemented significant reforms to its loan programs, aiming to enhance financial integrity and support for small businesses. These changes, under the leadership of Administrator Kelly Loeffler, are designed to tighten lending standards, increase oversight, and expand opportunities for entrepreneurs, particularly in the manufacturing sector. SBA Loans:
Reinstating Robust Underwriting Standards
One of the major shifts involves the elimination of the “Do What You Do” underwriting standard, a policy from the previous administration that allowed lenders considerable discretion in approving loans. This approach led to a surge in defaults and a negative cash flow of approximately $397 million in the 7(a) loan program. The SBA has now reinstated stricter underwriting criteria to ensure the program’s sustainability and protect taxpayer dollars. National Business Capital+6SBA+6SBA+6
Restoration of Lender Fees
The SBA has also reinstated lender fees that were previously waived, a move that had undermined the financial integrity of the 7(a) loan program. The waiver of these fees resulted in a significant revenue shortfall, contributing to the program’s financial challenges. By restoring these fees, the SBA aims to maintain the program’s zero-subsidy status and ensure its long-term viability. Barron’s+2SBA+2SBA+2Barron’s
Expansion of Manufacturing Loans
In alignment with the “Made in America” initiative, the SBA has doubled the loan cap for small manufacturers from $5 million to $10 million under the 7(a) and 504 loan programs. This change is intended to bolster domestic manufacturing by providing small businesses with greater access to capital for expansion and modernization efforts. The SBA reported a 74% increase in 7(a) loan approvals for small manufacturers in the first 90 days of the Trump administration compared to the same period during the previous administration. Fox Business+1SBA+1SBA
Implementation of Fraud Prevention Measures
To address concerns about fraud, the SBA has introduced new verification measures in its loan application process. These include citizenship verification and date of birth checks to prevent loans from being issued to ineligible applicants, such as individuals under 18 or over 115 years old. These steps are part of a broader effort to ensure that SBA programs benefit legitimate small business owners. SBA+1Newsweek+1
Conclusion
The SBA’s reforms in 2025 represent a concerted effort to strengthen the integrity of its loan programs and support the growth of small businesses across the United States. By reinstating robust underwriting standards, restoring lender fees, expanding loan caps for manufacturers, and implementing fraud prevention measures, the SBA aims to create a more sustainable and equitable lending environment. Small business owners should stay informed about these changes and consider how they may impact their financing options.SBA
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