"Faith-based organizations are eligible to receive SBA loans regardless of whether they provide secular social services," the SBA said in a statement. "No otherwise eligible organization will be disqualified from receiving a loan because of the religious nature, religious identity, or religious speech of the organization."

This seems a pretty clear-cut flouting of the Constitution. The First Amendment reads, "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof."

"The government cannot directly fund inherently religious activities," Alison Gill, legal and policy vice president of American Atheists, told NPR. "It can't spend government tax dollars on prayer, on promoting religion [or] proselytization. That directly contradicts the Establishment Clause of the First Amendment. This is the most drastic attack on church-state separation we have ever seen."

But religious advocates say the Supreme Court has been increasingly willing to look the other way on direct funding of religious entities. "In the last 15 years, the Court has moved increasingly in a permissive direction," says John Inazu, who specializes in religion and law at Washington University in St. Louis' School of Law.

The SBA appears to be headed in that direction too, saying that some of its own regulations "impermissibly exclude" religious organizations.

"Because those regulations bar the participation of a class of potential recipients based solely on their religious status, SBA will decline to enforce these subsections and will propose amendments to conform those regulations to the Constitution," the SBA said.

Wow. That seems like a pretty major policy change.