Lending policies surrounding small business loans for small and medium enterprises (SMEs) have shifted in recent years due to economic and regulatory changes across the financial services sector. 

For your bank to remain compliant with changing regulations while mitigating risk and prioritizing growth, it must closely track these shifts and stay up-to-date on new policies. While this sounds challenging, an automated business lending solution can help your bank stay current, allowing it to adjust its policies accordingly.

For 2025, there are a few federal regulatory changes that will impact SME loan practices. Some of these changes will make compliance and system modernization more urgent than ever. Other new policies will influence how banks collect borrower data and determine disclosure obligations. 

This article examines the latest federal and regulatory changes, strategies to mitigate your bank's risk of non-compliance, and how an automated business lending solution, such as a small business lending platform, can assist while streamlining the entire loan process.

The Impact of Recent Lending Policies 

Possibly the most significant shift in lending policy has been the tightening of credit standards. Due to economic volatility stemming from the pandemic, defaults have increased. In response, lenders are requiring more collateral and higher credit scores from applicants before approving loans. 

For example, as of June 1, 2025, the Small Business Administration (SBA) has revised its minimum credit score requirements for its 7(a) loan program. The SBA previously required a minimum score of 155 but has now raised it to 165.

Additionally, collateral is now required for all loan amounts of $50,000 or more. Before the revision, collateral was required on all loans of $500,000 or more.

Although these SBA changes often seemingly come out of the blue, a business lending solution like small business lending software can help your bank keep up with evolving SBA lending guidelines.

CFPB’s Section 1071 Rule Adds New Compliance Burden

Another shift in federal policy surrounding commercial lending pertains to increased regulatory scrutiny from governments and regulatory bodies. 

Lending practices for loan origination, underwriting, and reporting are facing stricter policies to protect consumers and ensure the financial stability of financial institutions.

To make things more complicated, the CFPB’s Section 1071 rule revised the deadlines for meeting the rule. Financial institutions that made at least 2,500 small business loans in each of the last two years now have until July 1, 2026, to meet compliance with the rule. It was originally set for July 18, 2025.

Meanwhile, lenders with between 500 to 2,499 loan originations have until January 1, 2027, to meet compliance, while lenders with between 100 and 499 originations have until October 1, 2027.

The 1071 rule requires these banks to collect and report details about applicants, including their race, ethnicity, gender, loan purpose, amount, and pricing.

So, for banks, it means:

  • Updating systems to collect and report this data.
  • Training staff to ask for this information respectfully.
  • Ensuring the process adheres to strict privacy and compliance standards.

The goal is to improve transparency and support fair lending. But it also adds a lot of new work for lenders who will need to update or add business lending solutions that handle automated data collection, easy reporting, and compliance checks.

Strategies for Risk Management 

Your bank can moderate its risk while adhering to new and emerging lending policies by altering its strategies. A digital business lending solution can help with many of the processes required to meet lending regulations.

Here are some of the advantages of a digital business lending solution:

Enhanced Credit Risk Assessment

To keep up with tightening lending standards, your bank should refine its risk assessment processes by leveraging advanced data analytics and machine learning. 

Many digital business lending solutions, such as small business lending software, have enhanced capabilities for evaluating borrowers' creditworthiness. They incorporate both traditional credit data and alternative data sources, such as social media, utility payment histories, and real-time financial behaviors. 

Together, these business lending solutions enable banks and financial institutions to gain a more comprehensive understanding of an applicant's risk profile, empowering better decision-making based on more accurate risk assessments.

Digital business lending solutions with built-in compliance tools can automatically track and report demographic data as required by Section 1071. 

Portfolio Management

Your bank needs a flexible approach to managing loan portfolios as regulations tighten and lending grows more cautious. This includes regularly adjusting portfolios to fit market trends and rules and running stress tests or “what-if” scenarios to stay prepared for downturns and maintain long-term stability.

A digital lending platform can also enhance your bank's portfolio management by integrating compliance and risk tools throughout every stage of the loan lifecycle. It centralizes loan data, automates workflows, and adds real‑time monitoring. This can help your bank quickly spot trends like late payments or data breaches. 

The best digital business lending solutions also have customizable compliance dashboards to support readiness for regulatory reporting and audits.

Automation

Modern digital business lending solutions have automated compliance systems. These systems automatically monitor and report on regulatory requirements, thereby reducing risks.   

For example, as it relates to CFPB’s Section 1071 rule, an automated system can:

  • Collect the correct data automatically - The system can ask the borrower the right questions at the right time and store the answers in the correct format, so it's easy for your bank to recover.
  • Keep the data secure and private - Platforms can separate demographic information from the credit decision process, as the rule requires.
  • Generate reports easily - It can automatically create the reports that lenders have to submit to regulatory authorities, saving time and reducing errors.
  • Track compliance - The system can flag missing or incorrect data, helping lenders correct it before they incur fines.  
  • Stay updated with changing rules - Automated platforms can be easily updated to reflect changes in the law, ensuring your bank stays current.

Even though lending rules are getting more complicated, automated business lending solutions can save your bank time and money. They help reduce errors, expedite loan processing, and ensure your systems are compliant with new regulations.

Overcoming Barriers to Implementation 

There are a few challenges to keeping lending practices in line with current rules and regulations. One big issue is the difficulty of integration. 

AI-powered tools and automated compliance systems offer powerful features, but integrating them with older systems requires significant time and resources. To keep things running smoothly, it's important to complete this integration quickly.

This is a big challenge as banks work to meet the Section 1071 deadline in July 2025. Your bank will need to ensure that its current lending systems can handle the required data fields and formats. If not, they may need to be upgraded quickly. 

Partnering with a new software provider like Biz2X can help your financial institution meet this urgent need to stay on track.

Supporting Staff Through Change

Another barrier has to do less with technology and more with people. Whenever new technologies and lending processes are introduced, they can be met with resistance. This is particularly true with employees who are accustomed to traditional practices. 

Therefore, your bank or financial institution should invest in comprehensive and ongoing training programs, while fostering a culture of continuous learning, to help your staff adapt to changes.  

Many small business lending platforms are designed with easy-to-use interfaces and provide built-in training resources. This can help staff learn new processes faster and reduce resistance to change when implementing new ones.

Clear communication and patience will also be important for positive user experiences.

Balancing Resources in a Slower Market

The last challenge is managing resources during a time of slow or moderate growth. Banks need to invest wisely to support key projects, keep daily operations running smoothly, and meet regulations, without compromising in any area.

Thankfully, for commercial lending departments, advanced business lending solutions can cut long-term costs by automating compliance, reducing errors, and speeding up loan processing.

Final Thoughts

As regulations surrounding small business lending continually change, your bank needs to respond by implementing the right strategies and technology to track those changes. 

The combination of tighter credit standards and new compliance deadlines has added pressure on financial institutions to modernize quickly and efficiently.

By investing in an automated business lending solution and supporting staff through comprehensive training, your bank can meet these new obligations and build a more resilient, inclusive, and future-ready lending operation. 

With the right technology, tools, and proactive planning, your bank can turn compliance into an opportunity for smarter growth and better service.

FAQs About Business Lending Solutions

1. What is an automated business lending solution, and why is it important now?

Business lending platforms are an SME financing solution that can do more than meet compliance. They can help your bank manage loan applications, credit assessments, and approval, and they also automate workflows and reduce manual processes. Adopting an automated business solution is critical at this point in time because Fintech lending is on the rise, and banks need to adapt to remain competitive.

2. What is the role of automation in a small business lending platform?

In addition to meeting compliance and removing common manual steps in underwriting, automation speeds up the loan application process and approves loans faster. It can also help determine repayment terms, accurate reporting, and secure data handling.

3. Can small business lending software help our bank handle startup and working capital loans better?

A business lending solution like SBA loan software can make tracking SBA interest rates, onboarding, loan approvals, disbursements, and repayment schedules easier and faster. This can be a huge boon for your bank, as SBA loans are notoriously document-heavy and can take a considerable amount of time. However, an automated business lending system makes the process less burdensome.

4. Can an automated business lending solution help our bank comply more easily with regulations?

Absolutely! A digital platform or software automates data collection, tracks changes in lending laws, and generates reports for rules like the CFPB’s Section 1071. This can help your bank stay compliant without the need to research changes on the internet continuously.

5. How can partnering with a fintech provider help our bank adopt a small business lending platform?

Fintech partners have ready-to-integrate tools that speed up onboarding and system upgrades. They can also help your bank modernize its workflows and reduce implementation costs.

Ready to navigate new lending regulations with confidence? Discover how Biz2X’s business lending solutions can help your bank stay compliant, reduce risk, and accelerate growth. Schedule a demo today.