NCUA Easing CU Participation in SBA's Commercial Development Program

ALEXANDRIA, Va. – In response to an issue that arose during the recent Partnering and Leadership Successes member business lending workshop, NCUA Director of Examination and Insurance Dave Marquis issued a memorandum encouraging the five regional directors to “evaluate and consider granting a waiver for all loans made as part of [the Small Business Administration's] 504 program.” SBA’s 504 loan program for commercial development uses a combination of credit union and SBA financing in a two-step funding process. Credit unions run into a problem in the first part when the institutions have to fund the entire loan balance for up to four months before SBA’s money comes in, which exceeds NCUA’s member business lending loan-to-value cap. In the second step, SBA funds a junior lien from a community-based non-profit organization, shrinking the loan-to-value ratio to 50%-80%, within NCUA’s regulatory limits. The issue surfaced during the March 25 PALS workshop. “In researching this issue after the PALS workshop,” NCUA Board Member Debbie Matz said, “our staff found that, in fact, NCUA Regional Directors already have the authority to grant waivers that can effectively allow federally insured credit unions to fully fund loans in SBA’s 504 program. This action will help credit unions better serve small business owners who need to buy real estate, machinery or equipment in order to expand and modernize their businesses.” She added that “providing a waiver for the credit union’s entire SBA 504 loan program, when such a waiver is merited by a well managed credit union, allows for greater flexibility and reduces time delays in the approval and funding of individual 504 loans.” As NCUA’s liaison to SBA, Matz said this is the first action in her ongoing efforts to improve credit union access to SBA loans. “I will continue working with NCUA staff in an effort to resolve inconsistencies between NCUA and SBA business lending rules, wherever possible and consistent with safety and soundness. I believe that doing so will help more credit unions safely meet the financing needs of small business owners across America,” she said. [email protected]