According to a NAFCU survey, the member business lending cap is having an impact on loan approval, loan participation activity and hiring.
With the past 12 months, 10.3% of participants responding to NAFCU’s March Economic & CU Issues Monitor said they had to turn down loans due to the 12.25% of assets MBL cap restriction.
Nearly 14% said they had to turn to a loan participation in order to stay under the cap, NAFCU reported.
The lending limit has also discouraged hiring in a direct way with 3.6% of respondents saying they were prevented from hiring staff dedicated to business lending in the past 12 months due to the cap.
Meanwhile, SBA loans continue to be a growing segment in many credit union portfolios, according to NAFCU. The average credit union has just over $113,000 in outstanding SBA loans, while survey respondents’ average SBA portfolio is over $1.7 million.
Nearly one quarter (23.3%) of survey participants are SBA preferred lenders. On average, 56.9% of responding credit unions’ SBA loans are guaranteed, the data showed. The most-utilized SBA product was 7(a) loans at 25.5%, followed by CDC/504 loans (21.8%) and micro loans (1.8%).
Nearly 41% of respondents’ SBA loans are under $50,000 and close to 68% are under $200,000.
More than half (53.6%) of survey participants said that applicants specifically ask for SBA loan products while one quarter of respondents have seen an increase in demand for SBA loans in the past 12 months.
When asked about improvements that could be made in the SBA’s loan processing, responses included providing a clearer understanding of the agency’s eligibility requirements, making the process less cumbersome and providing better training for loan officers.