WASHINGTON—A proposed increase in fees related to the Small Business Administration’s (SBA) 7(a) program, could come with unintended consequences to small business borrowers, contends CUNA.
CUNA shared those concerns in a letter to the House Small Business subcommittee on economic growth, tax and capital access for its hearing on the proposed 7(a) fee changes.
As CUToday.info earlier reported here, Gail Jansen, VP at Kinecta FCU, testified during the hearing.
Loans made through the 7(a) program can be guaranteed as much as 85% of loans, with the guaranteed portions of the loan exempt from the member business lending cap. The SBA indicated in its FY2020 budget request that the 7(a) program has an expected shortfall in funding, leading to the agency proposing an increase in fees to make up the shortfall.
Concerns Expressed
“CUNA supports the SBA charging appropriate fees that are necessary to sustain the 7(a) Loan Program without cost to taxpayers. We believe this is the original intent of the program and has allowed it to operate effectively,” the letter reads. “In addition, we understand it is necessary for fees associated with the SBA’s loan programs to increase on occasion to compensate for related increases in administrative costs.
“However, we are concerned that the 7(a) Loan Program fees continue to increase without an obvious increase in costs, such as those related to administering the Program or those resulting from a significant deterioration in the SBA’s loan portfolio,” the letter adds.
Request for Reevaluation
CUNA said SBA loan programs remain a critical tool for credit unions as they meet members’ needs for business capital and credit.
“…We have concerns that the amount of the fee increase proposed for FY 2020 could cause some potential borrowers to forego or delay a small business loan backed by the SBA,” the letter reads. “Therefore, we ask this subcommittee to request the SBA reevaluate its proposed fee increase to ensure the amount of any increase is absolutely necessary to maintain the program.”
There are currently 6,532 outstanding SBA loans by credit unions in the aggregate amount of $2,768,245,096, CUNA said.