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WASHINGTON-Lafayette Federal Credit Union Board Member Michael Hearne represented CUNA last week during a roundtable discussion set up by the Senate Small Business Committee and its chair, Senator Olympia Snowe (R-Maine) regarding the Small Business Administration’s 7(a) loan program. No official statements were provided during the roundtable to promote candid discussion, but Hearne did submit a statement for the record summarizing the points he hoped to make on behalf of credit unions during the discussion. CUNA strongly supported SBA’s recent decision to expand the type of credit unions eligible for 7(a) participation, Hearne said. His statement read “over time.it will enable a number of small businesses to obtain financing that they may not have been able to obtain using a commercial bank. That is because the average credit union member business loan size is just over $100,000, an amount much lower than what many banks are willing to provide, as we understand it.” Hearne explained that SBA had only recently issued a legal opinion letter permitting all credit unions to apply for its 7(a) lending program. It had previously been confined to community chartered credit unions. He listed many reasons credit unions generally do not make business loans, including lack of small businesses’ knowledge that credit unions can lend to them and many credit unions feel they do not have the resources to develop a business lending program. Hearne pointed out that just 1,500 credit unions currently offer business loans. This situation should turn around though, he said because demand is growing at the same time that traditional loans at credit unions, like auto loans, are declining. Additionally, SBA’s new legal interpretation and NCUA’s proposed rule regarding member business lending will aid credit unions in serving small businesses. After SBA’s legal opinion letter, CUNA announced that it had formed an alliance with Newtek Small Business Finance, Inc., a small business lending service provider, headed by former SBA senior official John Cox. “That said, however, there are still obstacles that thwart SBA and member business lending at credit unions,” Hearne wrote. “There is a 12.25% statutory limit on member business lending at credit unions, which is a significant restriction other financial institutions do not face. CUNA wants to work with Congress at the appropriate time to expand or eliminate this limitation.” Additionally, he suggested the loan participation process be streamlined to increase credit union usage. Some credit unions have already expressed concerns about the processing of their application, which SBA is presently addressing. Hearne has been retained by CUNA as a consultant on SBA issues, as he spent seven years with the agency in the CFO’s office. Since leaving SBA as financial policy group director, Hearne has been consulting for many SBA lenders to analyze their portfolios and providing SBA loan sale bidders with historic performance analyses. -

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