Credit Unions' Participation in SBA 7(a) Program Hits 100 Mark, More Apps in the Pipeline
WASHINGTON - Five months after Small Business Administration Administrator Hector Barreto announced all credit unions could participate in the SBA's 7(a) loan program, the number of credit unions offering SBA 7(a) loans to small businesses has hit the 100 mark. The 100th credit union to be approved for the 7(a)...
Your article was successfully shared with the contacts you provided.
WASHINGTON – Five months after Small Business Administration Administrator Hector Barreto announced all credit unions could participate in the SBA’s 7(a) loan program, the number of credit unions offering SBA 7(a) loans to small businesses has hit the 100 mark. The 100th credit union to be approved for the 7(a) program was $127-million University of Maine Credit Union in Orano. It joins the ranks of 21 other credit unions that have been approved so far this year alone. SBA Administrator Hector Barreto said he’s optimistic the agency will have at least eight more approved by the end of SBA’s fiscal year in September. Barreto confirmed there are applications in the pipeline and the SBA is trying to get them expedited as quickly as possible. He’s certain that the SBA will hit its target by the end of September because, he said, the SBA has streamlined the application process and introduced a lot of innovations to the program to facilitate a faster application and approval process. Already the SBA has made 30% more 7(a) loans than it did in its previous fiscal year. It did $17 billion total in loans in its last fiscal, of which 7(a) loans amounted to $10-$12 billion. Barreto said loans to Hispanic small businesses are up 45%; to African-Americans, 75%, and to women, veterans, and Asians, 35%. “The average size business loan a credit union makes is consistent with the size of an SBA 7(a) loan,” said Barreto, who urged more credit unions to apply for 7(a) loan approval. University of Maine CU President/CEO Howard Dunn said the CU had been making a minimal amount of small business loans before it filed its application with the SBA, but “we decided we wanted to make a commitment to helping our members with business loans and lines of credit.” The city of Orano is about 65 miles northwest of the coastal city of Bar Harbor. Most of the businesses in the area, said Dunn, are small. University of Maine CU has $106 million in its loan portfolio, and about $75 million of that comes from real estate with the balance derived from auto and consumer loans. Dunn described the credit union as being “a heavy lender.” Dunn said he realizes University of Maine CU will eventually need to have a dedicated business lending department. He’s not sure how large it will need to be – the CU’s staff numbers 70 – but he said “that’s the price we’ll have to pay to demonstrate our commitment and handle the loans effectively.” Even after it was approved as a SBA 7(a) lender, University of Maine CU has continued working with the SBA to gain proficiency in making 7(a) loans. They met with agency officials, in fact, the week of July 7 to learn what kind of skills the staff will need. “Regulatory wise, we want to make sure we’re doing everything right,” said Dunn. “If you’re going to make SBA loans, you have to be committed to doing them. The SBA is willing to hold our hand until we’re comfortable handling the loans ourselves,” he explained. Dunn said it took two months from the time University of Maine CU filed its application to when it heard back from the SBA. “We followed up with the application and phoned the SBA regulatory to learn the status. That’s key,” he said. While University of Maine CU is the latest CU to become an approved SBA 7(a) lender, credit unions like Americu CU, Rome, N.Y. was one of the first CUs that was approved. That was in 1983. Roxanne Sopchak, vice president of marketing said when the credit union was approved 20 years ago, it had a more limited field-of-membership than it does now that primarily included Griffith Air Force Base. At the time, a lot of men were retiring from the Air Force and wanted to start their own business, so becoming SBA 7(a) approved was a useful product for Americu CU to be able to offer them. Nowadays, Americu’s FOM is multi occupational and includes about 450 select employee groups. It has about 90,000 members. Sopchak said there isn’t much demand from members anymore for small business loans, but “the tool is in the box if they ever need it.” According to Callahan & Associates, as of the first quarter 2003, 1,610 of the estimated nearly 10,000 credit unions in the U.S. were offering member business loans, and total member business loans accounted for 2.2% of all credit union loans. Not surprisingly, larger credit unions are more likely to offer MBLs – credit unions over $100 million in assets hold $6.6 billion of the $7.7 billion in MBLs. Barreto said he wasn’t surprised more credit unions haven’t applied as yet for the 7(a) program. “A lot of times, when credit unions think about doing something that has to do with the federal government, they become gun shy because the bureaucracy of the government,” said Barreto. That’s not the case with the SBA, he said. Credit unions that are 7(a) authorized have three things going for them, said Barreto – the guaranteed part of the loan doesn’t count towards credit unions’ MBL limit; it opens credit unions up to an additional secondary market for SBA loans; and it allows credit unions to offer the product and service to their members. And it’s not just SBA 7(a) loans that credit unions can offer. The SBA offers a range of other products, and getting involved with them, especially small credit unions, give them a sense of legitimacy. Barreto opined there are many credit unions that are already making business loans, but they aren’t aware that’s the type of loan they’re making. Barreto said the SBA plans to continue working with CUNA and folks in the field familiar with the 7(a) program to market it. The SBA now has a district office in each state. If Web site hits are an indication of interest in the program, the agency’s Web site recently had 1.5 million visitors in one day. In addition to its 7(a) guaranteed and 504 non-guaranteed loan programs, the SBA has been involved with venture capital and procurement events, such as Business Matchmaking. Implemented in conjunction with the U.S. Chamber of Commerce and Hewlett-Packard, the event provides small businesses with the opportunity to present product and service solutions to buyers through pre-scheduled, one-on-one appointments with procurement managers. Barreto said he realizes some credit unions may need more assistance than others with learning how to do SBA 7(a) loans, and a lot depends on the individual credit union. He said the agency plans to continue to work with the credit union trade associations to convince more credit unions to be approved as SBA 7(a) lenders. “There are already a lot of credit unions making small business loans that don’t realize they’re doing it,” the SBA administrator said. “Credit unions are key providers.” -
Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.
Your access to unlimited CUTimes.com content isn’t changing. Once you are an ALM digital member, you’ll receive:
Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers,
resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
Exclusive discounts on ALM and CU Times events.
Access to other award-winning ALM websites including Law.com and GlobeSt.com.
Go beyond the standard loan shopping experience and engage your members with a pre-qualification solution that consistently delivers 30 percent more loans at a fraction of your current cost. Realize the power of “No Credit Impact” messaging and the latest in lending technology.
Are you fighting for digital transformation alone at your credit union and facing resistance? This toolkit is stocked with compelling benefits, stats, success stories, and a slide deck to help get buy-in from the rest of the C-Suite or board.
What is your credit union’s profitability plan and how are you progressing towards those goals? This eBook outlines five success strategies to guide your credit union’s journey to a strong profitability plan.
Don’t miss crucial strategic and tactical information necessary to run your institution and better serve your members. Join Credit Union Times now!
Free unlimited access to Credit Union Times' trusted and independent team of experts for extensive industry news, conference coverage, people features, statistical analysis, and regulation and technology updates.
Exclusive discounts on ALM and Credit Union Times events.
Access to other award-winning ALM websites including TreasuryandRisk.com and Law.com.