To Support Underserved Small Businesses, Rep. Chu Unveils Legislation to Make SBA’s Community Advantage Loan Program Permanent

WASHINGTON, D.C. — Today, Rep. Judy Chu (CA-28), who sits on the House Committee on Small Business, and Ranking Member Rep. Nydia Velázquez (NY-07) announced the introduction of H.R. 7560, the Community Advantage Loan Program Act of 2024, legislation to improve and make permanent the Small Business Administration’s (SBA) Community Advantage (CA) pilot loan program. One of the greatest challenges small businesses face is accessing financial capital, and that is especially true for underserved small businesses. For over a decade, the Community Advantage program has been helping close this funding gap.

“Business loans have been critical in helping small businesses recover from the COVID-19 pandemic, and have helped power a small business boom since 2021. Yet, underserved small businesses like those owned by Veteran, rural, and low-income entrepreneurs often lack the credit history, banking relationships, or other requirements needed to access traditional loans. The SBA’s Community Advantage program has a track record of over a decade helping these underserved firms secure loans, and its permanence would give lenders certainty and allow even more prospective business owners to join the small business boom, serve their communities, and thrive,” said Rep. Chu, a longtime advocate of the Community Advantage pilot program who has introduced legislation to improve and extend the program in previous Congresses.

“Access to capital is the lifeblood of our nation’s small firms, it’s what allows them to expand and hire more workers. Unfortunately, underserved small businesses are consistently less likely to receive all the credit they need despite being just as likely to apply for loans,” said Ranking Member Velázquez. “The Community Advantage program had a decade-long track record of helping underserved entrepreneurs launch and grow small businesses. I’m proud to co-sponsor this vital legislation to codify the Community Advantage program so we can continue to close this funding gap.” 

The SBA’s government-guaranteed loan programs provide capital to small business owners who otherwise may not be able to access it. Its flagship 7(a) program provides entrepreneurs with up to $5 million in capital at reasonable rates, but unfortunately has struggled to reach underserved entrepreneurs. The Community Advantage Pilot Program was created to help close this credit gap in underserved markets by allowing mission-oriented nonprofit lenders, such as Community Development Financial Institutions (CDFIs), to make small-dollar 7(a) loans.

These lenders are required to set aside 60 percent of their CA loans to underserved markets, such as Veteran-owned businesses, rural businesses, new businesses, and businesses located in HUBZones, Empowerment Zones, and other low-income communities. Further, they also often provide technical assistance to the businesses they serve. As a result, Community Advantage has been far more successful than the traditional 7(a) program at reaching our most underserved small businesses. In FY 2023, these mission-based lenders provided 791 loans valued at $139.7 million through the CA program. Over 56% of all CA program loans are made to startups and new businesses, compared with only 38% of 7(a) loans. And the proportion of all CA loans made to veteran-owned businesses is over 30% higher than that of 7(a) loans made to Veterans.

After Administrations of both parties have extended the pilot program numerous times since its creation over a decade ago, the Biden-Harris Administration recently established the CA Small Business Lending Company (SBLC) program through a rulemaking process to provide more permanency for the program and lenders. This legislation would build on these efforts by permanently codifying Community Advantage into federal law.

This legislation is endorsed by the Mission Lenders Working Group, the National Association of Development Companies (NADCO), Opportunity Finance Network (OFN), the National Association for Latino Community Asset Builders (NALCAB), the California Association for Micro Enterprise Opportunity (CAMEO), and the African American Alliance of CDFI CEOs.

“The Mission Lenders Working Group (MLWG) is a coalition of SBA certified Community Advantage (CA) lenders that includes SBA Certified Development Companies (CDCs), SBA Microloan Intermediaries and Treasury certified Community Development Financial Institutions (CDFIs) from across the country with a shared commitment to financing, supporting, and sustaining underserved and underbanked small businesses and we support the Community Advantage (CA) Loan Program Act of 2024 and we stand ready to work with Congresswoman Chu and her colleagues on both sides of the aisle to see it passed and signed into law as soon as possible,” said Alison Feighan on behalf of the Mission Lenders Working Group. “This important legislation will bolster SBA-backed lending to underserved and unbanked small businesses by utilizing the experience of seasoned CA lenders with a track record of financing and supporting businesses that conventional 7(a) lenders were unable to reach. We applaud Representative Chu’s leadership in crafting a bill that codifies the CA program and builds on the success and lessons learned from the CA pilot.”

“NADCO supports the Community Advantage Loan Program Act of 2024, which ensures access to integral capital to the businesses that often face the most challenges attaining financing, both conventionally and via SBA’s capital access programs,” said Rhonda Pointon, NADCO President and CEO. “We applaud Congresswoman Chu for introducing this important legislation and commend her years of dedication to the businesses served by the Community Advantage program.” 

“Representative Chu's unwavering commitment to championing the permanency of the Community Advantage program is truly commendable,” said Harold Pettigrew, President and CEO of Opportunity Finance Network. “The Community Advantage program has been critical in helping mission driven lenders, particularly Community Development Financial Institutions (CDFIs), provide entrepreneurs in underserved markets with access to the capital needed to start and expand their businesses. This bill will help unleash the full potential of the program, supporting the growth of small businesses across the country.”

“The Community Advantage Pilot Program (CA) is a lifeline for Latino small businesses and aspiring entrepreneurs in underserved markets. Through nonprofit financial intermediaries deeply embedded in their communities, CA provides the tools needed to be successful,” said Marla Bilonick, NALCAB President and CEO. “NALCAB applauds Representative Judy Chu (CA-28) for championing the needs to minority entrepreneurs and introducing legislation that enable the program to help even more of our nation’s innovators start a business, grow and create new jobs.”

“The SBA’s Community Advantage Loan Program is a powerful resource for underbanked small businesses. Even though small business creation is booming right now, credit is tight, especially for women- and minority-owned businesses,” said Carolina Martinez, CEO of CAMEO. “We are grateful to Representative Chu for introducing legislation to help tackle this challenge by making the SBA’s Community Advantage Loan Program permanent.”