As a top-tier SBA lender, Cadence Bank is playing a role in modernizing the loan program that’s been helping American businesses since the 1950s.

As he does most Tuesdays, Alan Thomes, Cadence Bank’s Small Business Administration (SBA) managing director, was busily preparing for a meeting. However, this meeting was a bit different from the norm, as it was a small, invitation-only gathering in the executive offices of the White House and hosted by the White House National Economic Council (NEC) and the Small Business Administration (SBA).

The meeting—formally titled The Small Business Lending Summit—was a half-day discussion about the present and future states of the small business lending ecosystem. Roundtable discussions were moderated by SBA Administrator Isabel Casillas Guzman and featured leaders from the Treasury Department and NEC as well as 16 representatives from leading SBA lenders, including big banks, regional banks, credit unions and non-bank lenders.

Its purpose was to learn more about how the federal government and its lending partners can work more closely to close gaps and ensure access to capital for all small businesses, especially those that are traditionally underserved, like those located in inner cities and rural areas. Underserved populations also include women, minorities, veterans and tribal groups.

The forum gave lending organizations a chance to discuss their priorities for supporting small business growth around the country and for Administration officials to learn more about how current regulatory policies are impacting loan volume and the ways technology updates can streamline processes.

Here, Thomes shares some key takeaways from the meeting and what the small business community can expect from the SBA lending program in 2024.

Q. As a top SBA lender with an average of 900+ new loans on its books each year, Cadence Bank teammates have significant experience working with many types of small business owners. What are some of the things you shared with government officials about challenges with lending in traditionally underserved markets?

A. One way Cadence is unique from some other lending organizations is that we have a dedicated SBA business unit that handles the 7(a) lending programs. Our team works with the SBA forms and systems all day, every day. So, from our vantage point, I shared these five challenges we often encounter when working with clients from underserved markets:

1. Inadequate financial reports – Historically, small business applicants haven’t had exposure to the type of financial reporting required for loan applications. Therefore, when applying for a loan, many owners aren’t prepared to present their financials in an acceptable format. While this is the most significant hurdle, fortunately, there are many free online resources available—including the SBA website—to help owners prepare the financial documents that are required.
2. Communication and cultural barriers – Language barriers often exist between parties. This, coupled with an inherent lack of trust in banks and the government, can make business dealings more challenging.
3. Limited financial flexibility – Applicants often have no capital or collateral, which makes lending more risky and facilitates the need for programs such as the SBA.
4. Credit challenges – Applicants may have poor credit scores due in part to having used credit cards, online lenders, high-rate finance companies and personal loans to fund the initial start-up or growth of a business.
5. Lack of business acumen to scale up a business – A business may be operating fine at its current level, but growth and expansion can be risky without proper processes, people and skills in place.

Peer lenders concurred with this sentiment and the Administration noted these gaps existed, acknowledging that changes should occur to better serve this segment of the market.

Q. One of the roundtable topics was about technology trends in small business lending. What are some of the trends that were discussed?

A. The SBA, like many businesses, is working hard to keep up with technology.  

• One ongoing activity is the digitization of lending and making online and mobile-accessed financial tools more easily available to applicants in underserved communities. Since the pandemic’s Paycheck Protection Program (PPP) rollout, the SBA and other government agencies have learned a lot about the need for quality financial records, data security and mobile access. It was acknowledged that legacy policies and procedures are not keeping pace with the high rate of advancement of financial technology and consumer expectations. Fraud mitigation was another big concern expressed, given these rapid changes.
• The recent updates to its online lender identification program, Lender Match, were discussed. This free website takes an applicant step-by-step through the submission process and makes recommendations about lenders the applicant should contact. Since its revamp was rolled out in August 2023, small-dollar loans under $50,000 have increased by 20%, and loans under $500,000 have grown by 14%.
• There was a lot of discussion about the need for more financial literacy among applicants – and not just those from underserved communities.

Q. Consumer Financial Protection Bureau Director (CFPB) Rohit Chopra and Acting Comptroller of the Currency (OCC) Michael J. Hsu discussed some key actions that independent regulators have taken to expand access to capital for underserved communities – including the issuance of new final rules. What news stood out to you?

One of the big talking points was around Section 1071 of the Dodd-Frank Act, which covers demographic data collection and whose requirements are not fully resolved yet. Before it was amended in March 2023, banks rarely collected it because of the federal government regulations around fair lending. For years, the banking industry has reported data about mortgage lending but not small business lending, which is also an important economic barometer. This is an example of rulemaking catching up with the need to understand the impact SBA loans are making.

Also, this past November, the SBA released updates to the Standard Operating Procedures (SOP 50 10). This is the key rule book lenders use for the 7(a) and 504 lending programs. Again, the SBA is trying to get away from a “we’ve always done it this way” mentality and is working to simplify rules that keep up with technology and business trends. One example is e-signatures, which is a commonplace business practice today, but its use wasn’t fully addressed in SOP rules and government regulations.

Q. In a post-meeting news release, the SBA announced that it is forming a new federal advisory committee dedicated to small business lending in 2024. What can you tell us about it?

Well, like many things during the 2020 and 2021 pandemic shutdowns, regular dialogue between the SBA and lending institutions slowed to a trickle because of other priorities. Then, during 2022 and 2023, the agency focused on PPP fraud and updating key software. The new advisory committee is expected to help reduce the communication gaps that exist between the agency and lenders. It will allow SBA leaders to engage directly with a diverse set of lending experts to stay current with the small business community and fine-tune existing programs.

Learn more about how government-guaranteed loans and how the Cadence Bank team can help your business by visiting our SBA Loan program webpage.

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.