SBA must ensure cooperatives can access lending programs

January 4, 2023

The Small Business Administration’s (SBA) proposed rule on its business lending programs includes a provision that fails to address the SBA’s personal or equity guarantee requirement within (7)a lending programs, CUNA and other organizations wrote to the SBA. The organizations—representing cooperatives—call on the SBA to ensure cooperatives are eligible for 7(a) loans without undue burden by removing the requirement to provide a personal guarantee.

“The rule’s failure, however, to address the prohibitive personal or equity guarantee requirement is the antithesis of meeting the needs of thousands of cooperatively owned small businesses across the entire country,” the organizations wrote, adding that the proposed rule fails to meet the statutory directives for the SBA within the 2018 Main Street Employee Ownership Act.

“Since passage of the 2018 legislation, Congress has further clarified its intent for SBA to make structural changes in its lending programs that would provide cooperatives with access to capital and for the agency to fully implement the requirements within the legislation,” the letter reads. “This has been made clear through numerous House Small Business Committee hearings and, most notably, in the House Financial Services and General Government Committee’s FY 2022 Appropriations Report.”

“Cooperative models offer a solution not only to address the tide of baby boomer business owners who will soon retire but also to build wealth, especially in communities of color and low-income communities,” the letter reads. “To help people capture this opportunity, we strongly believe the most important thing SBA can do is ensure that cooperatives have access to its lending programs.”