New Harris small business push: Easier rules for loans

The Biden administration is relaxing rules for government-backed small business loans, as Vice President Kamala Harris makes support for startups a focal point of her White House bid.

In a rollout featuring Harris, the Small Business Administration is easing the terms for a program that lets employers refinance debt incurred for land, buildings and equipment. The agency expects the changes, which follow a series of similar revisions to the program over the last few years, will make it easier for small businesses to meet eligibility requirements and to potentially lower the costs of their loans by thousands of dollars. The SBA backs small business loans as a way to reduce risks to banks and other kinds of lenders and expand access to financing

“Today’s final rule and announcement build on our work to support entrepreneurs by cutting red tape and ensuring small businesses can access capital, refinance SBA loans and continue to hire workers in their local communities," Harris said in a statement.

Harris has served as a key spokesperson on small business initiatives throughout the Biden administration, including earlier moves to ease lending rules that triggered a bipartisan backlash on Capitol Hill. On the campaign trail, she has pledged to expand tax deductions for startups with the goal of spurring 25 million new business applications by the end of her first term.

"The Biden-Harris administration at the SBA, throughout this entire administration, has really doubled down on simplification of our products for expansion purposes, to help more small businesses access the affordable capital that they need to really grow their businesses and launch their businesses," SBA Administrator Isabel Guzman said in an interview.

The SBA effort in Monday's announcement focuses on the agency's "504" lending program, which provides support for small business loans tied to land, buildings and equipment. It's available to businesses worth less than $15 million. The changes are intended to let businesses tap the SBA's refinancing options and reduce their payments on existing loans, whether they're backed by the agency or not. The revamp will make the uses of the loan more flexible and remove a requirement that borrowers have to demonstrate a minimum reduction in their loan payments to obtain refinancing.

Last year, total number of refinancing loans under the SBA 504 program was 568, with a total value of almost $761 million.

"It's an asset builder," Guzman said. "It's been the thing that powers strong expansion. And it also helps businesses with debt refi. But there have been challenges in the program that really have limited access for some businesses. So this is our opportunity to really expand a high-performing program for small businesses and reduce costs for them at a vital time when we want to see their continued growth and opportunities in this economy."

The focus on debt refinancing comes as the Federal Reserve begins to lower interest rates, in a move that will reduce borrowing costs for businesses. According to the White House Council of Economic Advisers, small employers are especially likely to benefit from the Fed's rate cuts because many are dependent on bank financing and have floating-rate loans.