WASHINGTON—Ahead of the Senate Small Business Committee’s hearing on managing risk in the Small Business Administration (SBA), America’s Credit Unions wrote a letter describing credit unions’ perspective on measures impacting risk related to SBA’s 7(a) Loan Program.
Loans made under the 7(a) program can be up to 85% guaranteed by the government, with the guaranteed portion not counting against the credit union member business lending cap of 12.25% of assets.
“One of the best ways the SBA can manage risk is expanding and improving its work with its regulated financial institution lending partners such as credit unions,” ACU President/CEO Jim Nussle wrote as he explained the need for expanding credit union participation in SBA lending programs. “While credit unions are eager to grow their SBA loan portfolios, many report that the administrative burden makes it extremely difficult to do so. Lack of internal expertise and high costs associated with participation remain significant barriers.”
Streamlining SBA loan processes would be “a game-changer” for credit unions and the small businesses they serve, ACU said.
Nussle also wrote on the importance of safeguarding SBA programs from risks introduced by fintechs:
“The rise of fintech lenders in SBA programs has brought both opportunities and challenges. While fintechs have demonstrated an ability to leverage technology to reach new markets, their participation in SBA initiatives has raised serious concerns about program integrity,” he explained. “To address these concerns, we urge the SBA to adopt stringent safeguards for fintech participation in its programs. This includes enhanced initial vetting, continuous monitoring, and requirements for compliance with the same regulatory standards that are applied to depository institutions.”