WASHINGTON—Both credit union trade groups are pushing back on a proposal to give the Small Business Administration (SBA) direct lending authority in competition with CUs and other lenders.
As part of its markup of its section of the Democratic budget reconciliation package, the Build Back Better Act, the House Small Business Committee recently approved legislation that included a proposal to grant the SBA the new direct-lending abilities.
Under the provisions in the bill, the SBA could make 7(a) loans of $150,000 or less directly to borrowers or “through partnerships with third parties.”
House Small Business Committee Chairwoman Nydia Velázquez (D-NY) and Senate Small Business Committee Chairman Ben Cardin (D-MD) said the intent of the proposal is to expand access to smaller dollar credit for small businesses, some of whom were missed in the initial phase of the Paycheck Protection Program (PPP), NAFCU explained.
$4.5B In Proposed Funding
The “Build Back Better” package, still undergoing the reconciliation process in Congress, would provide the SBA with nearly $4.5 billion to create this new program.
While the legislation leaves a lot of the details of the new program to SBA, NAFCU did note the package includes provisions would allow SBA to originate and disburse direct loans under this program, should it choose to, or use financial institutions to offer the loans and allow them to collect fees and cover costs for helping distribute and offer the loans.
NAFCU said it is opposed to the provision putting the SBA in direct competition with credit unions.
Preference for Partnerships
“While we do not believe the SBA should be making loans directly, we stand ready to work with Chairwoman (Nydia) Velázquez (D-NY) and Chairman (Ben) Cardin (D-MD) to make it clear that the SBA should continue to partner with credit unions and other community financial institutions. We look forward to helping them achieve their goal of getting additional credit to small businesses,” stated NAFCU Director of Regulatory Affairs Ann Kossachev.
Kossachev did note, “We strongly support efforts to ensure the nation’s Main Street small businesses have access to the credit they need to finance their operations,” adding that NAFCU continues to believe that credit unions are the best option for that.