SBA ready to drop credit union restrictions?

WASHINGTON-The Small Business Administration (SBA) appears ready to eliminate restrictions on credit union participation in 7(a) guaranteed loan programs, according to a recent report in American Banker Online. Currently, only community chartered credit unions are eligible to participate under agency policy because they serve the general public, as much as a credit union can. A potential appearance of discrimination, in the eyes of SBA, has kept credit unions out of the guaranteed lending loop. SBA’s Associate Deputy Administrator for Capital Access Ronald E. Bew was quoted as saying last week that allowing credit unions to participate would help the agency increase the number of loans it guarantees and reduce the average size of those loans. Last year, SBA guaranteed approximately 40,000 loans at an average of $230,000 each through the 7(a) program, the Banker reported. The agency’s goal is to reduce the average loan size to $175,000 and increase the number of guaranteed loans. “Our priority is to expand the number of loans we do and reach out and touch more businesses,” Bew, a former banker, said, but added the situation is still being scrutinized. “I think it would be helpful if we could use any avenue we could find to make loans,” he said. CUNA General Counsel Eric Richard observed, “Mr. Bew’s comments are something new. It’s his first public comments that I’m aware of.” He said this could be interpreted as a positive sign. Last time CUNA met with SBA’s new General Counsel David Javdan, he promised Richard that the issue would be resolved in the “near future” and that he “didn’t buy into the government approach to postpone things indefinitely.” “It has been a longstanding goal to persuade the SBA to make the change to permit full credit union participation in the 7(A) program, and we will continue efforts to make full participation a reality,” NAFCU Director of Regulatory Affairs Gwen Baker commented. In a letter to SBA Administrator Hector Barreto, CUNA is urging swift action on the decision to allow more credit unions to participate in SBA 7(a) guaranteed lending. “We could not agree more and commend Mr. Bew for his assessment,” CUNA President and CEO Dan Mica wrote. CUNA boldly requested, “While we very much appreciate the verbal support, we believe it is time now for the agency to act by reinstating your previous policy. Such action will not only benefit credit unions but will provide small businesses with additional sources of much needed credit – as Congress intended.” Mica also pointed out in the letter that CUNA staff recently met with SBA’s new General Counsel David Javdan, and, “They felt the meeting was very positive and concluded that there is support within the agency for expanded credit union participation.” [email protected]