WASHINGTON, DC (March 9, 2017) — Randolph-Brooks Federal Credit Union Executive Vice President and Chief Lending Officer Sonya McDonald will testify today on behalf of NAFCU before the House Small Business Subcommittee on Investigations, Oversight and Regulations on the Small Business Administration’s 7(a) loan program and the value credit unions provide to the nation’s small businesses.
Today’s hearing, “An Overview of SBA’s 7(a) Loan Program,” begins at 11 a.m. Eastern. McDonald’s testimony will cover her credit union’s participation in the SBA’s loan programs. “In 2016, RBFCU was the No. 1 SBA lending credit union in our 55-county SBA district,” she says. She adds that her members make a variety of SBA loan requests, from start-up franchises to business acquisitions and the purchase of owner-occupied real estate. She says the credit union has provided SBA loans for as little as $15,000 to as much as $3 million.
“SBA products allow us to leverage our lending dollars, mitigate the risk associated with the loans, and extend more credit to our communities’ small businesses,” she says.
She will also discuss with the subcommittee the three-year memorandum of understanding that NAFCU signed with the SBA in 2015 aimed at getting more credit unions to increase their lending to member small businesses through SBA micro loan programs.
In addition, McDonald will hit on some of the challenges credit unions face in lending to their small-business members, such as the arbitrary, statutory cap on credit union member business lending. Credit unions are limited in their member business lending to the lesser of either 1.75 times their net worth or 12.25 percent of total assets. Furthermore, business loans above $50,000 count toward this cap. McDonald notes that this cap has not been adjusted for inflation in more than 18 years and “greatly hamstrings a credit union’s ability to meet its members’ needs.”
Government-guaranteed portions of SBA loans do not count toward credit unions’ member business lending cap, but the non-guaranteed portions do. “This could ultimately lead to a situation where a credit union may be an excellent, or even preferred, SBA lender and ultimately have to scale back participation in SBA programs as they approach the arbitrary cap,” she says.
She also points to a 2011 SBA study that found credit union business lending grew as a percentage of credit union assets both before and during the financial crisis; during the same period, banks’ small-business lending decreased. A 2001 Treasury study found that credit unions do not pose a threat to the viability and profitability of banks. She will urge the subcommittee to support legislation to remove the arbitrary cap on credit union member business lending.
McDonald also will share with the subcommittee ways to improve SBA’s 7(a) loan program, including the reintroduction of the “Credit Union Small Business Lending Act” as offered by House Small Business Committee Ranking Member Nydia Velázquez, D-N.Y., in the 110th Congress. The bill would amend the Federal Credit Union Act to exclude any SBA loan (guaranteed and non-guaranteed portions) from the meaning of “member business loan” of a credit union. She also notes ways the loan programs can be enhanced at the SBA.
“If Congress and the SBA were to make it easier for credit unions to participate in these programs, small businesses throughout the nation will have greater access to capital at a time when it is greatly needed,” she says.
The National Association of Federally-Insured Credit Unions is the only national trade association focusing exclusively on federal issues affecting the nation’s federally-insured credit unions. NAFCU membership is direct and provides credit unions with the best in federal advocacy, education and compliance assistance. For more information on NAFCU, go to www.nafcu.org or @NAFCU on Twitter.
