On Tuesday, U.S. Sen. Jeanne Shaheen (D-NH) questioned the Small Business Administration’s (SBA) decision to approve a Small Business Lending Company license for a lender seeking to sell.
In a letter to Isabel Guzman, Shaheen, chair of the U.S. Senate Committee on Small Business and Entrepreneurship, said approval of the license for Funding Circle would be premature, she said, as the Funding Circle’s United Kingdom-based parent company is seeking to sell the company.
Awarding a license to a company that is preemptively seeking to offload its operation even before receiving its full approval or making a single SBA loan would be unprecedented and, in my view, extremely unwise,” Shaheen wrote. “SBA’s mission is too important to grant loan-making authority to a lender that is not fully committed to the agency’s programs. Given that your oversight division, the Office of Credit Risk Management, will have sole responsibility for regulating the licensee and ensuring that its capital reserves are adequate, the identity of the new parent company is a critical piece of information that SBA should have before granting the entity the authority to make loans.”
The SBA provisionally selected three applicants in November to receive SBLC-backed loans. Funding Circle was among them. In the last month, however, it was discovered that Funding Circle’s parent company is seeking to sell the business amid concerns about being involved in SBA programs. On an earnings call in early March, the parent company’s CEO said the 7(a) program “requires a significant amount of cash and capital to grow the SBA proposition and we don’t believe that this is the best course of action for the group.”
It is unclear if Funding Circle made the SBA aware of the planned sale as it sought final approval for its application.
“If Funding Circle actively shopped itself while its application was under review without telling SBA, that lack of communication should weigh heavily against it as SBA evaluates its fitness to participate in SBA’s lending programs,” Shaheen said.