Proposed 7(a) changes will negatively impact CUs, borrowers

CUNA strongly opposes the proposed changes to the Small Business Administration’s (SBA) 7(a) loan program, it wrote to the House Small Business Committee for its hearing on the program. Loans made through the program are up to 85% guaranteed by the federal government, with that portion of the loan not counting against the credit union member business lending cap.

“Credit unions participate in this critical loan program and will be negatively impacted by the two proposed rules…both propose the removal or modification of well-established lending standards, which have ensured programmatic integrity for decades,” the letter reads. “One highly significant impact, among others, of the proposed loosened lending standards set forth in the SBLC Proposed Rule is SBA’s apparent intention to open up the 7(a) loan program to an unlimited number of non-federally regulated lenders without material guardrails or any defined focus on or nexus to SBA’s mission lending, despite SBA stating that the primary intention of the proposed rules is to aid underserved borrowers.”

CUNA notes it supports the stated goal of the proposed changes—to aid traditionally underserved borrowers—but that the changes could harm the borrowers the SBA intends to support.

“Furthermore, we believe that the combined impacts of these proposed changes could lead to additional negative impacts on various stakeholders, including, but not limited to, current and future borrowers of SBA loans, by lowering material standards related to underwriting and portfolio performance,” the letter reads.

CUNA filed official comments with the SBA in April, noting the above concerns.