SBA direct lending will harm local financial institutions’ relationships

April 26, 2022

Establishing and retaining a relationship with a credit union is the best way for a small business entrepreneur to partner with a provider of essential financial services, CUNA wrote to the House and Senate Small Business Committees Tuesday.

The letters, which champion credit unions’ role in supporting emerging businesses, come ahead of the committees holding oversight hearings with the Small Business Administration (SBA) on Wednesday.

“The Small Business Administration’s  government guaranteed lending programs epitomizes a successful public-private partnership, and it’s one that leverages private sector expertise,” the letters read. “Generally, the SBA does not function as a direct lender, but guarantees the repayment of loans made by a lender such as a credit union. SBA’s lending programs, such as the 7(a) Loan Program, allow small businesses to work with local lenders or other lenders of a business’s choice throughout the loan process. The SBA guarantees these loans ensuring that financial institutions are made whole in an instance of default by the borrower.”

The letters also supported policies that would block the SBA from stepping in as a direct lender to small businesses under the 7(a) program, including H.R. 6037 from Rep. Blaine Luetkemeyer; (R-MO) and S. 3382 from Sen. Tim Scott; (R-SC).