The benefits of SBA-backed loans from your credit union
There are many benefits for credit unions that work in conjunction with a designated credit union service organization (CUSO) to help provide business loans and services to their members. Perhaps the most important of these is the Small Business Administration (SBA) guaranteed loan.
The SBA was established in 1953 to help provide assistance to small businesses looking for financial backing in the post-World War II economic boom. It was also established to help provide financial assistance to already-existing businesses.
The SBA is particularly valuable because it provides specific federally-backed guarantees to loans that traditional financial institutions would not normally agree to finance. For example, if a small business lacked the traditional required amount of cash, collateral, time in business, etc., many banks and credit unions that might otherwise decline to offer financial backing can now do so with the understanding that such loans are backed by the SBA. And in the event the small business actually fails, the financial institution that provided lending is not necessarily 100% on the hook due to this government-backed program.
This, of course, reduces a financial institution’s exposure to risk in providing such loans. In the United States, a large part of the economy is dependent upon small business success; however, many small business owners struggle to find financial assistance that is needed to develop their business. It therefore makes sense both for credit unions and their members to take advantage of SBA loans to help provide future economic growth, jobs and opportunity.
The challenge for many credit unions is that for a variety of reasons, they lack the specific expertise and/or personnel to handle SBA-backed loans. That’s why working with a CUSO is such a valuable relationship.
MBL has worked with many credit unions over the years to establish just such relationships. By partnering with an experienced credit union service organization, many credit unions are able to realize the benefits (both financially and to their members) of providing SBA-backed loans to their members without having to invest internally in the personnel and training required to administer such loans.
For more information about Member Business Lending (MBL) and its relationship with credit unions, call Derek Money at (801) 545-7934.