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New partnerships to bring SBA and credit unions closer

Only for profit businesses are eligible for SBA's 7(a) small business loan.

Borrowing and lending is a huge component of how many financial institutions make money. The Small Business Association's primary lending program, however, is one credit unions have kept their distance from. New partnerships may now close this long-standing gap between the two.

An SBA collaboration with the National Credit Union Administration, and joint ventures between credit unions and third-party lenders, may bring more awareness to the program.

Opportunities for increase
In a February press release announcing a joint webinar between NCUA and the SBA, Debbie Matz, board chairman of the NCUA emphasized the deep connections credit unions' hold to their communities, to encourage credit unions to learn more about SBA's small business lending.

Credit unions' personal member relationships could benefit business owners and the local branch that serves them. But according to the SBA, credit unions have remained routinely uninvolved with the program over the last few years.

Known as 7(a), the SBA's most common loan program would allow credit unions to curtail their lending criteria and serve more business owners. But even with the SBA guaranteeing much of the loan, credit unions have not proven themselves eager to finance member needs under this structure. With SBA shouldering a substantial percentage of both small business and commercial loans - 85 percent of small business loans - Credit Union Times attributes this under usage to being ill-informed.

The allure of such a partnership was underscored by SBA Administrator Maria Contreras-Sweet's comments at this year's National Association of Federal Credit Unions caucus.


A man stands in line at a bank. Some credit unions spend up to $600,000 on the backing needed to support lending programs.

Free from regulation and compliance restrictions, electronically underwritten, and with few fees, the Credit Union Times reported that the administrator found these loans should be especially attractive. Contreras-Sweet did note, however, that credit unions serving borrowers of less than $50,000 wouldn't count toward the business lending cap.

Additional incentives
The League of Southeaster Credit Unions' LEVERAGE Business Lending CUSO and Tennessee-based loan provider Capital Growth Solutions, are seeking to aid credit unions in the transition.

According to LEVERAGE's chief operating officer Lisa Burroughs the high price tag that comes with adhering to SBA's infrastructure may have something to do with the low adoption.

The SBA reported credit union lending being up 38 percent from 2013's fiscal year, the federal government's fiscal year running from Oct. 1 to Sept. 30.  Seven (a) activity, however, only increased 1.6 percent in the last two years.

"Doing 7(a) lending is more complex than conventional loans, and most credit unions don't have the expertise on their staffs," Burroughs told the Credit Union Journal. "It's not low-hanging fruit for a lot of credit unions".