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SBA Partners with NCUA and Credit Unions to Expand Access to Loans

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Scott A. Chernich and Steven L. Owen
Foster Swift Credit Union News
March 25, 2015

Credit union members will soon have greater access to capital to start or expand a small business thanks to a joint initiative of the U.S. Small Business Administration ("SBA") and the National Credit Union Administration ("NCUA"). 

The SBA and the NCUA recently signed a memorandum of understanding ("MOU") to expand the accessibility of small-dollar SBA loans from credit unions. By partnering, the two organizations aim to increase awareness about the SBA's loan programs for credit unions and the NCUA.

According to Maria Contreras-Sweet, the head of the SBA, "Since 2011, the outstanding balance of SBA loans by credit unions has seen nearly a 50 percent increase - from $810 million to $1.2 billion. This signals a growing demand for SBA loan programs. Millions of Americans have used their credit union to finance their car, home or children’s education. We want to empower credit unions to finance small business start-ups, too."

Once a loan is approved, the SBA will use its resources—partners such as SCORE, Women’s Business Centers (WBCs) and Small Business Development Centers (SBDCs)—to offer free counseling and technical assistance to help small business owners deploy their working capital and grow their businesses and revenues, the SBA said.

Contreras-Sweet also explained why SBA lending is attractive for credit unions. "A unique aspect of the SBA and NCUA partnership is that SBA small dollar loans do not count against credit unions’ business loan cap, so they are well-suited to expanding access to these loans. This provides flexibility to credit unions to distribute small dollar loans, increasing access to capital to local economies and enriching the entrepreneurial communities which credit unions serve," Contreras-Sweet said.

SBA-guaranteed loans are designed to provide credit to business owners who might not qualify for standard business loans. The guaranteed portions of SBA-backed loans - which range from 50 percent up to 90 percent of the principal of each loan - do not count against a credit union's statutory cap on member business lending.

While small businesses have traditionally relied heavily on banks for their financing needs, it has become increasingly difficult for small businesses to access capital because of tight lending standards. With the SBA's new push to expand accessibility to SBA loans, look for credit unions to continue picking up the slack in small business lending.