ALEXANDRIA, Va.–Can credit unions apply for new federal funding to help cover payroll costs as part of efforts to sustain small businesses during the coronavirus pandemic?
They can, and at least three credit unions in the days after Congress passed the $2-trillion CARES Act have had questions for NAFCU about whether or not they can do so.
It’s likely many others will not just have the same question, but will apply for the funding in the weeks and months ahead. The CARES Act includes a Paycheck Protection Program that allocates $349 billion for new, partially forgivable small business loans to cover, among other things, payroll costs for employers with 500 employees or fewer, as well as sole proprietors, independent contractors and other self-employed individuals.
What’s often overlooked, said NAFCU EVP and General Counsel Carrie Hunt, is that “thousands of credit unions are tiny. They are small businesses and they have challenges.”
When asked whether non-profit credit unions that operate with a federal tax exemption might create bad optics by applying for federal funding, Hunt noted all credit unions pay payroll taxes like every other business.
One ‘Promising’ Piece
Meanwhile, Hunt said NAFCU will remain active in working on what she called another “promising” piece of the CARES Act, and that is the increased funding for the Small Business Administration’s loan program. Hunt said credit unions are eager to make the SBA 7(a) loans and those CUs already SBA certified are seeking more information while those that are not are working to achieve that certification.
“We want to make sure credit unions have easy access to SBA as Congress intended,” Hunt said.
The Paycheck Protection Program would allow for 100% federally guaranteed loans to small businesses that maintain their payrolls, with credit unions acting as the lenders.
While the SBA provisions hold promise, Hunt said NAFCU’s concerns with the CARES Act are primarily around the new “sweeping” rules related to loan forbearance on loans that are government-backed if the borrower can cite hardships related to COVID-19.
“It’s difficult enough already for a credit union with a big mortgage portfolio, and this just adds to the stress,” said Hunt. “It’s always a worry and even more so at this unprecedented time.”