Ernst presses the SBA for details of the lender’s Section 7(a) approval.

The top Republican on the Senate Small Business and Entrepreneurship Committee is demanding more details from the Small Business Administration about the recent approval of a new lender for one of its programs.

Committee Ranking Member Joni Ernst (R-Iowa) expresses concern about the SBA’s approval of the American Lending Center as a non-federally regulated lender in its 7(a) loan program.

Last month, the SBA approved ALC as a federally unregulated lender in the 7(a) program.

The 7(a) loan program is the SBA’s primary vehicle for helping startups and other small businesses obtain financing when they may not qualify for business loans through other lending channels.

The SBA does not make loans under the 7(a) program. Instead, it guarantees a portion of the loans issued and managed through commercial lending institutions.

ALC is authorized by the SBA to make only 7(a) loans in California.

The company is also approved for other SBA loan programs, including the 504 loan program, the state’s Small Business Lending Initiative and the Pandemic Wage Protection Program.

ALC operates several regional centers designated by USCIS to use EB-5 investment dollars to create jobs in targeted economic areas throughout the US

Under the EB-5 program, Foreign investors and their spouses and unmarried children under the age of 21 are eligible to apply for U.S. lawful permanent residence if they invest a minimum of $900,000 in a U.S. commercial enterprise and plan to establish or maintain at least 10 permanent full-time businesses day. jobs for skilled US workers.

According to State Department visa datamore than 60% of those admitted to the US under the EB-5 program in FY 2023 were from China.

ALC, according to a press release last yearis the only small business lender that combines SBA loan programs with the federal government’s EB-5 program.

In a letter to SBA Administrator Isabel Guzman, Ernst noted that “any investor based in the People’s Republic of China with sufficient resources to participate in the EB-5 program is more likely to be affiliated with or active in the Chinese Communist Party member”. , making their investments in the United States potentially competitive in nature.”

“ALC will now be able to directly select foreign-backed US small businesses for investment, primarily from China. If these loans are not repaid, the Americans will return the money to the ALC investors,” Ernst wrote.

John Shen, founder and CEO of ALC, said in a message on the company’s website that its approval as a 7(a) lender “opens the door for us at ALC to help many California small businesses get the capital they need to succeed.”

In a letter last month, SBA Financial Assistance Office Acting Director Alejandro Contreras said the SBA is “satisfied that the applicant has met the requirements to qualify for the SBA 7(a) loan program.”

The SBA reviewed the company’s internal control policies, lending policies and procedures, organizational structure, governance structure and business plan, Contreras said.

Among her questions, Ernst is asking the SBA to provide documentation supporting ALC’s approval as a 7(a) lender. She also asks the SBA how many 7(a) and 504 loans ALC or its affiliates have made since its inception in 2009.

Federal News Network has reached out to the SBA and the American Lending Center for comment.

Ernst told the Federal News Network in a statement that the SBA “needs to do everything in its power to lower costs instead of putting Americans on the hook for potentially risky loans.”

“I am holding the SBA accountable and demanding answers about what due diligence was done on the non-bank lenders they license to make SBA loans,” she said.