WASHINGTON — There are a number of ways credit unions can provide relief to struggling small businesses and bring in revenue at the same time, the Small Business Administration and CUNA said at a year-end meeting.
During a Dec. 22 audio conference call, Grady Hedgespeth, SBA's director of financial assistance, detailed an interim final rule adopted by the agency that uses an alternative base rate for determining the interest applied to certain SBA loans. CUNA said this interim rule has resulted in more favorable terms for lenders and is aimed at increasing lending. Hedgespeth also discussed another recently adopted rule related to weighted average coupons for formulation of pools, which allows the aggregation of multiple coupon rates. The SBA is working with both the Federal Reserve and the Treasury and its Term Asset-Backed Securities Loan Facility in an attempt to refuel SBA lending.
Meanwhile, the SBA said its Community Express pilot program, which assists small businesses owned by women, veterans and minorities in underserved areas, is "ideal" for credit unions. Under the agency's 504 loan program, credit unions were also reminded that they are not in violation of NCUA Part 723 as long as they are granted certain waivers for exemption from certain loan to value restrictions.
As a further incentive to partner with SBA, the agency said it has worked to reduce the amount of time for guarantees under its 7(a) lending program, decreasing the amount of time it takes to pay out guarantees to around 25 days. Credit unions were also encouraged to participate in SBA's Small and Rural Lender Advantage program, which is aimed at lenders participating in 20 or fewer loans with the SBA. Best suited for smaller loans, the program aims to simplify the documentation process for obtaining these loans.
Frank Kressman, staff attorney in the NCUA's Office of General Counsel,described the basic difference between the Federal Credit Union Act and the NCUA's regulations saying Congress established the act and from time to time can update it. However, the NCUA cannot change or circumvent the act because it is law. The NCUA has authority to establish and then modify its regulations, which must be consistent with the act, CUNA said. The purpose of having regulations in addition to the act is to allow the NCUA to further clarify and provide additional guidance. The MBL rule, for instance, is set out in the FCU Act, therefore the NCUA cannot simply increase the MBL cap as suggested by many members, according to CUNA.
Other NCUA refreshers included collateral and security requirements under parts 723.3 and 723.7 and the regulator's amendment a few years ago to allow credit unions to more fully participate in the program. The NCUA recently released an advance notice of Proposed Rulemaking to review its entire MBL rule.
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