Proposals from the Small Business Administration would make “detrimental shifts” in the SBA’s 7(a) lending program, CUNA and other organizations wrote to House and Senate Small Business Committee leadership. Up to 85% of loans made through the 7(a) program are guaranteed by the federal government, and the guaranteed portion of the loans do not count against a credit union’s member business lending cap.
The proposals would lift the moratorium on the number of non-federally regulated institutions that can make loans under the 7(a) program and loosen or remove the 7(a) program’s requirements for how lenders underwrite loans and how borrowers may use loan funds.
“Both propose removal or modification of long-existing prudent lending standards which have ensured programmatic integrity for decades,” the letter reads. “It is into this framework of significantly loosened lending standards that the SBLC Proposed Rule also intends to open SBA’s flagship 7(a) program to a potentially unlimited number of SBLC lenders, including non-bank financial technology companies, or ‘FinTechs,’ that would be regulated solely by SBA.”
“SBA’s stated intention for these sweeping changes is to aid traditionally underserved borrowers, a laudable goal which our organizations and our thousands of SBA lending partners fully support,” it adds. “However, we believe that the changes, as proposed, will not actually help minority and underserved communities, and could unintentionally harm the very borrowers that SBA is trying to aid.”
Specific concerns include: