Congressional hearing needed on SBA’s cooperative lending report

September 4, 2019

CUNA joined dozens of fellow National Cooperative Business Association CLUSA members Wednesday to request a hearing on the Small Business Administration’s recent report on cooperative lending. The letter was sent to leadership of the House and Senate Small Business Committees, Sens. Marco Rubio (R-Fla.) and Benjamin Cardin (D-Md.) and Reps. Nydia Velazquez (D-N.Y.) and Steve Chabot (R-Ohio).

The National Defense Authorization Act for fiscal year 2019 contained the The Main Street Employee Ownership Act, which required SBA to “study and recommend practical alternatives for cooperatives that will satisfy the loan guarantee requirements of the Administration.”

SBA has hosted two listening sessions on cooperative lending with lenders and other entities within the cooperative development sector.

“Through these discussions, and in a separate meeting with the U.S. Department of Agriculture that makes loans to cooperatives without personal guarantees, there were numerous alternatives proposed to the personal guarantee requirement that would enable the SBA to lend to cooperative businesses while mitigating risk,” the joint letter reads. “We appreciated SBA’s engagement and were hopeful there would be a commonsense solution to resolve the barriers for cooperative businesses. Additionally, we were optimistic that SBA would take a nominal step and provide alternatives and ideas of its own.

We were greatly disappointed to learn that the SBA did not provide any practical alternatives as required by law, and instead, relied on its existing requirements that make it implausible for cooperative businesses to access the agency’s programs,” it adds.

The letter also expresses concerns that SBA’s recommendation regarding an existing business to be sold and converted to an employee-owned cooperative, which recommends a selling business owner provide a full, unlimited personal guarantee for the life of the loan, is an “entirely unreasonable request for a business owner entering retirement.