By Ray Birch
LAKE CHARLES, La.—Chad Miller is sleeping better since the credit union obtained almost $2 million in Rapid Response Program (RRP) funds this year.
And those easy nights are coming not because of what the money can do for the credit union as much as what the dollars will allow the CU to do for a very needy segment of the business community here.
The CEO of the $168-million Southwest Louisiana CU told CUToday.info the funds will allow SLCU to expand its business lending to support more small ventures, especially minority companies.
There is a big gap in funding for tiny organizations, particularly during the health crisis, Miller said.
“We feel there is a real void for small business lending in our communities,” added Miller, whose CDFI credit union worked with CU Strategic Planning to obtain the $1.8-million RRP grant. “We’re able to kickstart our business services department, and take business services to a new level in our area. With the support of the RRP funds we will create programs for startup businesses that will be vital to the restoration of our community to help the local economy bounce back from COVID-19 and the hurricanes that have devastated our area in recent years.”
As CUToday.info reported here, some 244 credit unions in total received $401.8 million in awards from the Treasury Department’s new Rapid Response Program (RRP) as part of $1.25-billion in COVID 19 relief funds that are going to 863 community development financial institutions (CDFIs) overall.
Miller emphasized how small businesses have been hurting across the country during the pandemic, not only from the economic downturn but also from a lack of available loans.
‘Really Hurting’
“And small businesses are really hurting in the South,” he said. “Many of these businesses are very financially savvy and just need $20,000 to $30,000 in startup capital. But a lot of lenders don't want to take that risk. We're going to leverage our CDFI status and now our Rapid Response funding to be able to account for some of that extra risk, whether it's providing startup capital or just helping people bounce back from COVID.”
As CUToday.info has also reported, many small businesses had difficulty receiving PPP loans, with minority-owned small businesses missing out on the funding to a large extent.
Banks ‘Won’t Touch You’
Miller said the problem of funding for small businesses in the Southeast has been present for years.
“The banks here won’t touch you. You won’t even get your foot in the door for a business loan unless you have two years under your belt, two years of financials,” said Miller. “How is that going to help a small business get started?”
But start up they will, predicts Miller, whose sees a big interest in new companies now and as the pandemic lifts.
“Many of our members are wanting to go into business for themselves because of the very real possibility of being laid off,” explained Miller, noting the layoffs due to COVID-19 have engrained that thinking in many. “They realize entrepreneurship is a way out of reliance on others for wellbeing. But without startup capital, it’s impossible.”
The money will also be targeted to small and even micro businesses looking to bounce back from the economic slowdown brought on by the health crisis.
“Loans under $50,000 are hard to come by in our area, so we want to be the expert in loans to help businesses get back to normal,” said Miller.
Covering the Losses
Miller repeated the RRP funds will add to SLCU’s ALLL account to lessen the blow from higher delinquencies and charge-offs that will likely be a byproduct of the tiny loans. He said RRP funds will also be used to hire a director of business services, and add to the expertise of the CU’s business lending team.
Southwest Louisiana Credit Union plans, too, to expand its overall business lending to get into larger SBA loans, and to work with a local business lending CUSO, as well.
The credit union’s increased business lending focus comes at a time when many of the big banks have been leaving the market.
“These RRP funds help me sleep better at night,” said Miller. “This is an area that desperately needs help here. These dollars will be game-changer for our communities.”
Other Areas of Need
Miller said the funds will also go to boost financial counseling services at the credit union, to help with affordable housing lending, and to compensate for risk taken in doing certain mobile home loans.
“Right now, land is required as collateral to do a loan for a mobile home,” Miller explained. “Being able to finance them by themselves without land is nearly impossible in southwest Louisiana. We will be able to leverage the funds to assist those members that cannot afford land along with the mobile home.”