The $338,647, 89-member Queens Cluster Federal Credit Union in Hicksville, N.Y. may not be the smallest financial institution the Small Business Administration has ever authorized to originate member business loans under the agency's 7(a) loan program, but it is among the smallest.
“We don't have anything in writing that says we're the smallest,” Queens Cluster FCU President/CEO Gerald Goldenbroit (pictured) said. “But that's what our training staff said during the SBA training.”
The SBA has not confirmed whether Queens Cluster FCU is the smallest cooperative it has ever approved to make the loans.
Goldenbroit, who is a retired NCUA examiner and served as an economic development specialist before he took the helm at Queens Cluster FCU, spoke proudly and earnestly of the credit union's accomplishment and the opportunity represented by SBA guaranteed loans, particularly for small credit unions.
“I am something of an SBA loan evangelist,” Goldenbroit said, chuckling a little. “More credit unions need to know of the opportunity these loans represent, both for them and for their members.
Goldenbroit explained that originating small business loans helps the cooperative's members, generates fee income for the credit union, and provides a flow of interest income for the credit union and others that participate in the loans. He also noted that, provided the credit union follows the agency's rules when originating a loan, the agency would guarantee up to 85% percent of it.
“We are an authorized SBA lender,” Goldenbroit said. “Any business loan we request the SBA to guarantee, they will review, issue an SBA loan number and send us an automation document. As long as we do what is in the automation document, if the loan defaults they will purchase the guaranteed portion from us. Now, if we sell the guaranteed portion to an investor they will pay the investor even if the loan defaults.”
The fact that the investor might be another credit union seeking additional interest income is good news for Goldenbroit. In that case, the other credit union will receive interest income and some of the proceeds from the sale can be used to offset the risk from the 15% of the loan the SBA does not guarantee.
Goldenbroit expressed particular satisfaction that when Queens Cluster FCU sells the loans to another credit union, it is able to cut out the middleman and do so without a broker. This in turn gives the loans higher interest rates, he noted.
Read more about small credit unions such as Queens Cluster FCU in the Sept. 23, 2015 print issue of CU Times.
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