SBA forced to abandon direct lending, handing profit to private banks
S. 2486 — Protecting Access to Credit for Small Businesses Act · Filed by Tim Scott (R-SC) · 8 cosponsors · Introduced Jul 28, 2025 · Referred to committee
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What it does
This bill prohibits the Small Business Administration from directly lending money to small businesses under its 7(a) loan program going forward, though it requires the SBA to continue servicing loans it made before this law passes. The effect is to eliminate direct SBA lending and force small businesses to borrow through private lenders instead, who would then sell the loans to the SBA for a guarantee—shifting origination risk and profit to the private sector.
Why we flagged it
The bill's operative effect is to redirect SBA 7(a) lending from direct government origination to private-sector intermediaries, who will originate loans and collect fees while the SBA guarantees them. This is a structural shift that enriches private lenders at the expense of small-business borrowers and direct government lending capacity.
What the text implies
- Private lenders will originate 7(a) loans and capture origination fees (typically 2–3% of loan value), a revenue stream currently retained by the SBA or passed to borrowers as lower rates.
- Lenders will apply stricter underwriting standards than the SBA's direct program, potentially excluding marginalized or high-risk small businesses (startups, minority-owned firms, rural enterprises) that the direct program was designed to serve.
The full analysis lists 4 implications of this text.
Who stands to gain
commercial banks; credit unions; non-bank lenders