BIRMINGHAM, Ala./TALLAHASSEE, Fla.—LEVERAGE believes that too many credit unions are overlooking the growing the Small Business Administration (SBA) opportunity.
The SBA lending program had its best year in 2015 with more than $23 billion loaned to small businesses.
“But credit unions played just a small part in the lending,” explained Lisa Burroughs, COO at LEVERAGE, an affiliate of the League of Southeastern Credit Unions. “While the outstanding balance of SBA loans by credit unions has seen nearly a 50% increase since 2011—it’s gone from $810 million to $1.2 billion—you can see that it is a small fraction of the total amount being loaned to small businesses. It also shows there is a growing demand for SBA loan programs. Credit unions have the capacity to make more SBA loans.”
Burroughs noted how SBA loans mean more to community-minded CUs than just building the portfolio.
“Small businesses are the backbone of our economy,” she said. “They are also major job drivers in local communities. The government guaranteed loan market is vital, as small businesses are counted on to add much-needed jobs that will help move the American economy forward. This type of lending also helps credit unions expand their member base, as small business employees are presented with new options for transaction accounts.”
The Right Way
Doing SBA loans the right way also enhances safety and soundness, offered Burroughs.
“The biggest benefit an SBA loan carries for the lender is a guaranty that protects a credit union from losses resulting from default. Servicing the loan properly is paramount to maintaining the SBA guaranty,” she said. “At this point many credit unions might see that they don’t have the expertise to start an SBA program. While, true for many, there is help. LEVERAGE Business Lending is a good example of a company that only deals with credit unions and has more than 150 years of experience in SBA lending. It can set up the infrastructure for credit unions with minimal cost.”
Burroughs emphasized the importance of more CUs making SBA loans, pointing to two instances where businesses had to reach out of state for loans.
No Reason To Go Out Of State
“Two Florida businesses recently needed loans to help them with their startups,” she said. “They secured SBA loans from out-of-state credit unions. There is no reason that credit unions should see out-of-state credit unions or banks give their members or potential members a loan.”
For more than 60 years, the SBA has been helping Americans start, build and grow businesses, said Burroughs.
“The SBA does this through an extensive network of field offices while also looking to partner with public and private organizations to facilitate the lending, primarily through 504 and 7(a) loans,” she explained. “Credit unions can play a major role in SBA lending, but traditionally they have not. As 2016 gets underway, most credit unions aren’t even considering SBA lending. This is letting a golden opportunity slip by.”