Both NAFCU and CUNA have spoken out against the agency’s loan programs, which they worry will harm credit unions.
The U.S. Small Business Administration (SBA) should not be permitted to expand programs that would allow the agency to make loans directly to businesses, credit union trade groups told congressional committees this week.
“While we support full funding for the SBA, we do not support any effort to provide new authority or expand direct lending at the SBA,” Brad Thaler, vice president of legislative affairs at the National Association of Federally-Insured Credit Unions (NAFCU), told the House Small Business Committee in a letter.
The committee held a hearing on the FY23 SBA budget request Wednesday.
Jim Nussle, president/CEO of the Credit Union National Association (CUNA), struck a similar note in his own letter to the panel, writing: “By becoming a direct lender to small businesses, the SBA is likely to harm local financial institutions’ relationships with businesses and possibly hamper these businesses from establishing important banking relationships that can only help their business survive and flourish.”
How Does the SBA Loan Program Impact Credit Unions?
The SBA has the authority to make direct loans, but has not exercised that authority, with some exceptions, since 1998. Instead, the agency has traditionally provided the funds to credit unions and banks to make those loans.
In his “Build Back Better” social spending initiative, President Biden proposed providing $2 billion over ten years to allow the agency to make direct loans. Provisions to expand direct lending were included in the House version of that spending plan, but the Senate has not been able to pass its version of “Build Back Better.”
The Biden Administration’s FY23 budget plan does not include an expansion of direct lending.
On the Same Page Regarding CDFIs
SBA Administrator Isabella Casillas Guzman told the House Small Business Committee Wednesday the agency would also like to expand its network of lenders, particularly Community Development Financial Institutions (CDFIs), that participate in SBA programs. She added the agency is attempting to simplify applications and other documents to help foster that effort.
These are moves the credit union trade groups would have no trouble getting behind. However, when it comes to direct lending, Thaler noted in his letter to the House committee that the agency’s own Inspector General has cited problems with the SBA programs.
Further, Republicans on the Small Business Committee revealed Wednesday there have been allegations of massive fraud surrounding the Paycheck Protection Program, a pandemic relief loan initiative operated by the SBA and the Treasury Department.
Thaler said as an alternative to direct lending, NAFCU supports legislation that would make it easier for credit unions to offer smaller business loans under $150,000 by exempting such loans from the National Credit Union Administration’s member business loan cap.