In its latest push to gather support for increasing the member business lending cap, NAFCU recently called on the SBA to aid in the fight.
NAFCU President/CEO Fred Becker wrote to SBA Administrator Karen Mills asking for her support of H.R. 4191, a bill that would better facilitate credit union lending through the agency.
Introduced March 8 by Rep. Kurt Schrader (D-Ore.) and Rep. Steve Chabot (R-Ohio), the bill would establish a separate approval process for loans made in the 7(a) program to credit unions using existing SBA staff and infrastructure. The bill would also create an outreach program to educate credit unions about SBA lending and authorize the agency to simplify the 7(a) application process for credit union.
NAFCU said H.R. 4191 would establish a program that would provide an 85% guarantee on credit union SBA loans made to members or businesses located in underserved areas and make technical clarifications to the Federal Credit Union Act to facilitate CU participation in the 504 Certified Development Companies loan program.
Becker and Mills, along with senior staff, met at SBA headquarters Feb. 8 to discuss how to improve credit union business lending, particularly through the SBA’s programs.
“We believe H.R. 4191 is an important step in the right direction toward this goal and we respectfully ask for your support for the bill,” Becker said, adding NAFCU stands ready and willing to work with the SBA to continue building credit union participation in its programs.
Becker also urged Mills to take a vocal position in favor of raising the MBL cap from 12.25% of assets to 27.5%.
Meanwhile, CUNA said it is focused on the Senate, and working with legislators to add MBL language to an upcoming Senate jobs bill. The trade association said S. 509, which would increase the MBL cap from 12.25% to 27.5% of assets remains active in the Senate, and has 22 cosponsors. A similar bill, H.R. 1418, has 122 cosponsors.
CUNA and credit union leagues have encouraged supporters to contact their legislators through a credit union action call, according to Ryan Donovan, CUNA senior vice president of legislative affairs.
CUNA said in light of passage of the House jobs bill, the Progressive Policy Institute is recirculating to federal lawmakers its December paper, “The Credit Gap: Easing the Squeeze on the Smallest Businesses,” which backs an MBL increase as a bipartisan plan that could enhance any jobs bills.
The NCUA recently reported that the number of credit unions offering MBLs has increased because of member demand. At the end of 2011, federally insured credit unions had a combined portfolio of $39.1 billion.
With the growing demand for MBLs, the NCUA reminded credit unions of several red flags they should be aware of, such as if the portfolio comprises higher risk loans such as gas stations, swimming pools and church loans.
Another bad sign is when MBL managers inform their examiners that borrower losses have not exceeded revenues yet, the NCUA said.
Other areas to watch for are if credit presentations lack conditions of approval and are dated after loan dispersal and when an insolvent borrower with no history cash flow gets an acceptable rating.
The regulator said a commercial borrower with a marginal capital and cash flow having no requirement to comply with leverage and cash flow covenants should be a red flag as collateral is located out of state where a credit union has not observed the collateral and has limited knowledge of market conditions.