WASHINGTON—Ahead of a congressional hearing here, both NAFCU and CUNA made clear they do not support any proposal allowing the Small Business Administration to get into the direct lending business.
In separate letters sent in advance of separate hearings held by the House Small Business Committee and the Senate Small Business and Entrepreneurship Committee, which featured SBA Administrator Isabella Guzman, both organizations were clear on their positions.
In NAFCU’s letters (House Small Business Committee, Senate Small Business and Entrepreneurship Committee), Vice President of Legislative Affairs Brad Thaler said the trade group is supportive of fully funding the SBA.
But when it comes to direct lending, Thaler pointed to SBA’s historically higher rates of fraud and defaults and wrote that problems with the proposal have “even reached the SBA’s Office of Inspector General (OIG), who included concerns with direct lending in their report to the Committee earlier this year.”
The Need to Expand Access
Thaler said that NAFCU and its credit union members wholeheartedly recognize and support the need to expand access to small-dollar business loans and have done their due diligence to increase the number of SBA lending partners, despite statutory limitations imposed on credit union’s ability to provide small business loans.
“Early in the pandemic, 70% of NAFCU members that were not already involved in SBA lending but did participate in the Paycheck Protection Program (PPP) expressed an interest in becoming a regular SBA lender,” added Thaler.
“NAFCU believes that there are better ways to encourage the SBA to work with existing lenders to address the stated need of access to smaller loans to small businesses and we stand ready to work with you to achieve that goal,” concluded Thaler.
CUNA’s Letters
In CUNA’s letters, meanwhile, the trade association stated that establishing and retaining a relationship with a credit union is the best way for a small business entrepreneur to partner with a provider of essential financial services.
“The Small Business Administration’s government guaranteed lending programs epitomizes a successful public-private partnership, and it’s one that leverages private sector expertise,” the letters read. “Generally, the SBA does not function as a direct lender, but guarantees the repayment of loans made by a lender such as a credit union. SBA’s lending programs, such as the 7(a) Loan Program, allow small businesses to work with local lenders or other lenders of a business’s choice throughout the loan process. The SBA guarantees these loans ensuring that financial institutions are made whole in an instance of default by the borrower.”
The letters also supported policies that would block the SBA from stepping in as a direct lender to small businesses under the 7(a) program, including H.R. 6037 from Rep. Blaine Luetkemeyer; (R-MO) and S. 3382 from Sen. Tim Scott; (R-SC).