news.cuna.org/articles/120178-sba-direct-lending-should-be-removed-from-reconciliation
SBALogo

SBA direct lending should be removed from reconciliation

November 17, 2021

CUNA joined organizations Wednesday calling on Congressional leaders to remove a provision allowing the Small Business Administration (SBA) to become a direct lender from the reconciliation framework. The proposal would allow the SBA to offer loans of $150,000 of less directly to small businesses, or through third-party partnerships.

“We have concerns that this new government operated program will undermine existing successful public-private partnership SBA loan programs while potentially limiting access to capital for those smallest of the small businesses due to increased complexity,” the letter reads, adding the legislation provides approximately $2 billion over a 10-year window for the program and 90 days to promulgate rules.

“The complexity of standing up a lending program in such a short timeframe will lead to numerous issues that may ultimately drive potential applicants away from any type of SBA lending,” the letter reads.

CUNA notes that previous efforts of the SBA to engage in direct lending “has been met with high rates of fraud and defaults” and the subsidy rate of direct lending was “drastically higher” than the subsidy rate for loan guarantee programs.

“The regulatory safeguards that exist for financial institutions have proven to be a much better shield to fraud and defaults as compared to SBA-run programs,” the letter adds.