CUNA's Richard: SBA's cuts in guaranteed loans could work in CUs' favor

WASHINGTON – The Small Business Administration’s decision to cut back the maximum size of guaranteed loans in its 7(a) program may prove to be good news for credit unions, although banks aren’t happy with the agency’s move. Starting Oct. 1, the maximum size of a loan backed by the SBA’s 7(a) program will be $500,000. It was previously $2 million. The new limit will be applied to the combined loans of each borrower. CUNA General Counsel Eric Richard said the new loan limit “is a function of the Bush administration’s request for cuts in certain appropriations programs,” and that included cuts of about 50% from the guaranteed loan program. Since the SBA’s mission has always been to spread credit around as wide as possible, the 50% cuts in the guaranteed loan program mean the amount they’re appropriated has to be divided in to smaller pockets, said Richard. He stressed that, “Credit unions haven’t been out their lobbying for the cuts in the loan program. We’re not trying to keep people out of the loan program, we’re trying to get them in.” Since credit unions currently participating in the SBA program typically make loans of under $100,000, compared to banks that tend to make larger loans, “it’s possible that the cuts in the SBA’s guaranteed loans will negatively affect banks more than credit unions,” Richard said. He acknowledged though that the handful of credit unions that make large loans will likely be more affected by the cuts than other CUs that make small SBA loans, but “the vast majority of credit unions will be minimally impacted by the SBA’s decision,” said Richard. Meanwhile, CUNA and the other trade association are continuing to talk with the SBA to convince the agency to open up the loan program for more credit unions to participate in. Richard said a meeting was scheduled for Sept. 23 between representatives from CUNA, NAFCU, corporate and natural person credit unions with the SBA “to participate in focus group discussions on how credit union participation in the loan program will work.” “We’re getting down to the nitty gritty,” said Richard. -