WASHINGTON-Credit unions and the Small Business Administrationare similar to two people going out on their first date, accordingto SBA General Counsel David Javdan. In his comments during a panelon the legal risks and requirements of SBA lending at the NCUA'sOct. 16 PALS conference, Javdan encouraged credit unions to bringproblems that may be specific to credit unions to the attention ofSBA so the two can work to resolve them. On February 14, SBA beganallowing credit unions, beyond those geographically based, to beginparticipating in their lending programs. “We need to hear fromyou,” Javdan said. “Come work with us. SBA is in the business ofdoing business.” He emphasized that SBA is always exploring avenuesto simplify its lending programs for all lenders. If problems arearising that may only affect credit unions, the agency would liketo work them out, he said. “It's not that we don't care. It's justthat we don't know,” Javdan explained. Additionally, to aid creditunions in expanding their business lending around the statutory12.25% of assets cap, NCUA recently approved a more flexible memberbusiness lending rule, NCUA General Counsel Bob Fenner explained onthe same panel. The rule reduces the 35% equity interest inconstruction loans to 25%, waives the $100,000 cap on unsecuredloans to one borrower for RegFlex credit unions, and allows up to100% financing on consumer-like commercial vehicles, up from 80%,among other things. “The regulation is good but Treasury did notallow it to be as good as it could have conceivably been,” CUNAGeneral Counsel Eric Richard remarked. And, while business lendinghas its upside, legal risks such as breach of contract, breach offiduciary responsibility, interference with the corporategovernance of the borrower, Equal Credit Opportunity Act,environmental problems, Bank Secrecy Act, and Fair Debt CollectionAct, and many others, come into play, he warned. The good news isthat most of these are also risks in normal consumer lending aswell, which credit unions are acclimated to, Richard added.Truliant Federal Credit Union CEO Marcus Schaefer was also on thepanel representing a credit union working to build up its businesslending portfolio. The credit union began member business lending18 months ago and has an application in to SBA for its 7(a) lendingprogram. As far as getting the program off the ground at the nearly$1 billion Truliant, Schaefer said, “There has not really beenanything that has stopped us in our tracks.” Of the recentamendments to NCUA's member business lending regulation, the mosthelpful have been the 100% vehicle financing, simplification ofdocumentation, increasing the unsecured limit to $100,000, theelimination of the personal guarantee requirement for RegFlexcredit unions, and the portions dealing with CUSO originations. Asof Sept. 31, Truliant had made $9.5 million in business loans for abed and breakfast, trucks and equipment, a taco restaurant andothers. The average loan size as of Sept. 31 was $49,[email protected]

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