SBA proposal includes redefining small banks

A Small Business Administration proposal to simplify business classifications would raise the classification of a small bank to assets of $5 billion or less. The current threshold is significantly lower, at $850 million..Under this guideline, an estimated 760 additional banks would qualify as small businesses, part of a broader addition of some 110,000 businesses to the small-business category as envisioned by SBA.Banks designated as small by the SBA have faster processing paths under the Preferred Lenders program, which allows qualifying banks to approve and manage SBA-backed loans without individual review from a government agency. Small banks can approve program loans with a baseline compliance check instead of more time-consuming underwriting assessments. “By streamlining definitions, the SBA will expand access [to] capital, counseling and contracting opportunities, which in turn create jobs and drive growth,” said SBA Administrator Kelly Loeffler. The proposal followed a mandated review that occurs every five years. A key facet of the proposal would simplify industry classifications to 4-digit category standards from the current 6-digit North American Industry Classification System, cutting “the total list of similar industry categories by approximately 65 percent, down to 338 broader classifications.” Governments in the United States, Canada and Mexico use the classification system to distinguish businesses by primary economic activity.A public comment period is open until Sept. 21.