Earlier this year, the SBA settled a lawsuit claiming that its lending practices encouraged urban sprawl and negatively impacted the environment. The settlement requires the SBA to establish future procedures for conducting environmental reviews of individual SBA 7(a) loans.
The lawsuit took place over what could become the new millenium’s key environmental battleground in the United States– urban sprawl. The lawsuit claimed that most SBA loans were made to suburban or rural areas and promoted urban sprawl. Urban sprawl, they claim, contributes to low-density, automobile-dependent new development, which leads to the loss of prime farmland and wildlife habitat, air and water pollution and increased congestion.
What’s interesting is that there’s not even agreement that urban sprawl is bad. The Small Business Survival Council says “Sprawl is usually equated with growth, and there’s nothing wrong with that.”
The SBA conceded that its environmental review procedures needed revision, but denied that SBA loans were responsible for urban sprawl. The SBA says it is local land use decisions that determine the extent of urban sprawl, not SBA loans.
The upshot? This settlement could make it harder for small businesses to get SBA 7(a) loans in the future. Especially in environmentally sensitive areas near wetlands, farmland, etc. Read more.