Funding Circle Receives SBA Small Business Lending License

Published 6 months ago
  Funding Circle

Funding Circle, a prominent online platform for small business loans, has been granted a Small Business Lending Company (SBLC) license by the U.S. Small Business Administration (SBA). The license will allow Funding Circle to participate in the SBA’s flagship 7(a) small business loan program.

The decision to award Funding Circle the SBLC license is a part of the Biden-Harris Administration’s initiative to modernize the SBA and address ongoing capital access gaps affecting small business owners. This move is also aimed at stimulating economic growth. Recent research by the Philadelphia Federal Reserve and Bank for International Settlements found that Funding Circle is enhancing access to capital for borrowers who traditionally struggle to receive credit from conventional banks.

An Effort to Bridge Gaps in Small Business Funding

Funding Circle’s Managing Director, Steve Allocca, expressed enthusiasm about the opportunity to assist more U.S. small businesses in securing necessary funding. With its advanced data and technology platform and excellent customer service, Funding Circle aims to become the leading SBA lender for 7(a) Small Loans under $500,000.

Current statistics show that over 50% of banks have imposed stricter lending criteria on small businesses. Minority-owned enterprises are particularly affected, with 51% of Black-owned, 40% of Hispanic-owned, 36% of Asian-owned, and 30% of White-owned businesses experiencing financial challenges due to limited credit availability.

Expanding the SBA 7(a) Program

The SBA’s 7(a) program guarantees up to $36 billion annually in small business loans up to $5 million. Despite the availability of this program, only a minor fraction of the 11,000 banks and credit unions in the U.S. participate. Notably, 25 lenders account for 50% of all 7(a) loans, with the average loan amount being around half a million dollars. This neglects the crucial need for smaller loans for small and underserved businesses.

Funding Circle, however, is changing this narrative; 77% of its loans are for less than $150,000, and 33% go to businesses in low-moderate income neighborhoods, while 40% reach businesses in rural areas.

By increasing lender participation and simplifying program requirements for loans under $500,000, the SBA aims to make it more efficient for small and underserved businesses to access loans.

Future Plans

Starting 2024, Funding Circle will offer SBA 7(a) Small Loans. Small businesses seeking financing up to $500,000 can apply through Funding Circle’s platform. Since its inception in 2010, Funding Circle has provided $4.5 billion to 45,000 small businesses in the U.S., and $21.1 billion to 143,300 small businesses globally.