Credit unions aren't willing to make the initial investmentrequired to offer Small Business Administration-supported loans ifthey face a restrictive cap, Redwood Credit Union President/CEOBrett Martinez told a House subcommittee.

“That's where the business lending cap ties in,” Martineztold Credit Union Times on Friday after his testimony onThursday. “The 330 credit unions that are currently making SBAloans are managing to the cap, and the rest say it's a biginvestment of time and money, to just hit a cap in the future. Nothanks.”

The 220,000-member, $2 billion-asset Santa Rosa, Calif.-basedcredit union is the largest SBA credit union lender in the countryby loan volume, and Martinez said his financial institution is at75% of the cap.

If the cap isn't increased, Redwood could only make memberbusiness loans for another 18 months, he told the panel.

The credit union has about $190 million in outstanding memberbusiness loans and $68 million in SBA loans, and has had to sellsome of its business loans on the secondary market to stay withinthe MBL cap, Martinez said.

“It's not a lever I want to pull, but one I can to allow us tocontinue to lend,” said Martinez, who was testifying on behalf ofCUNA.

He urged lawmakers to extend the SBA 504 refinance loan programand the SBA 504 First Mortgage Lien Pool programs, which facilitatesecondary market sales. Both are scheduled to expire thisSeptember.

NAFCU witness Bob Marquette, president and CEO of the $2.2billion Members 1st Federal Credit Union in Mechanicsburg, Pa.,told lawmakers his credit union has maintained an active MBLprogram, even when other area business lenders have retrenched.Now, the credit union is at 90% of its MBL cap and now has to beselective about the MBLs it issues.

“We estimate that Members 1st funded business loans in 2011created 52 new jobs in our area and helped save 269 more,”Marquette testified. If Congress would raise the cap as proposed byH.R. 1418, he said, his credit union could do a better job ofmeeting demand “and be even more competitive with our loanrates.”

SBA's programs have worked well for some lenders, but Marquettesaid SBA processes are challenging. His credit union has originatedtwo 7(a) program loans and three 504 program loans. Though Members1st worked with a community development corporation on the 7(a)loans, which went to two existing businesses seeking to expand,funding them took a year.

“The difference in processing time between a Preferred LendingProgram lender and a non-PLP lender has grown to months,” he said,“and effectively acts as a barrier to a new lender entering the SBAmarketplace.”

By contrast, he said, the 504 program loans appear to be treatedthe same regardless of which lender is issuing them.

“If Congress and the SBA were to make it easier for creditunions to participate in these programs, small businessesthroughout the nation will have greater access to capital at a timewhen it is needed most,” he testified.

Marquette said Congress should pass H.R. 4191, which wouldrequire the SBA to streamline its processes and create a program toreach out and provide assistance to credit unions to increase theirparticipation in the SBA small business loan program.

“It was eye opening for them,” Martinez said of the Housecommittee. “They want to help small biz and credit unions areperfect source for them to do that.”