The Securities and Exchange Commission is considering new regulations that alternative lenders say would curb their ability to lend to small businesses.

Reports by Bloomberg on Wednesday (Oct. 26) said the SEC is exploring whether to adopt new rules that aim to safeguard the alternative and shadow banking sector and protect borrowers. According to reports, the SEC is concerned that the influx in funds borrowed via these alternative finance sources could lead to financial trouble down the line for small businesses, upon which the nation’s economic health is so dependent.

The SEC’s proposed rule, first put forth last year, would require business development companies (BDCs), like alternative lenders, to use the total value of revolving credit lines offered to their SME borrowers when calculating indebtedness — and not only the amount those borrowers have actually used from their credit lines.

It would require these lenders to maintain high capital levels to safeguard against potential losses, meaning less cash can be used to finance small business loans, reports explained.

The Small Business Investor Alliance (SBIA) argued that the rules would lead to higher costs for borrowers and smaller financing facilities. Another industry stakeholder, Hercules Capital, similarly spoke out against the proposals.