WASHINGTON – A top credit union business lender urged Congress this morning to extend two fledgling Small Business Administration programs that have provided billions of dollars in capital to community borrowers and are scheduled to expire in September.

“It is important that Congress reauthorize the SBA 504 refinance loan program and the SBA 504 First Mortgage Lien Pool program” Brett Martinez, president of Redwood CU, the leading credit union SBA lender, told a panel of the House Small Business Committee, of the two programs created in the 2009 American Recovery and Reinvestment Act and scheduled to end in September.

“Allowing refinancing under the SBA 504 (refinance) loan program should be extended and consideration should be given to making them permanent,” said the credit union exec, who is representing CUNA at this morning’s hearing. “In some instances, it is the only vehicle by which a business owner with a maturing commercial real estate loan may be able to deal with a declining real estate market and stay in their building, thereby preserving jobs rather than losing the building, having to move, and likely shuttering a business.”

Redwood, a $2 billion credit union in suburban San Francisco, is the largest credit union SBA lender in the country, with $190 million in outstanding member business loans and $68 million in SBA loans, including $37 million in 7(a) loans and $31 million in 504 loans.

Under the 504 Refinance Loan program, borrowers can finance up to 90% of the appraised value of available collateral. Martinez said his credit union has used the program to help many members refinance their existing properties. “This is an example of the right product at the right time providing business owners what they need exactly when they need it the most,” he told lawmakers.

The SBA’s First Mortgage Lien Pool program provides a government guarantee on pools of portions of eligible 504 first mortgage loans for sale to third-party investors.

Two leading bankers, one representing Wells Fargo, the nation's leading SBA lender, and the other representing the Consumer Bankers Association, joined Redwood's Martinez in requesting Congress extend the SAB programs.

Both Martinez and Bob Marquette, president of Pennsylvania’s Members 1st FCU, who is also testifying this morning, repeated calls to Congress to ease current restrictions on member business loans by increasing the current 12.25% of assets cap on MBLs. Marquette, who is appearing on behalf of NAFCU, said increasing the capacity of credit unions to make small business loans would not pose a threat to banks but would be good for communities by increasing choices for small business borrowers.

A bill to raise the MBLs cap to as much as 27% of assets, has been stuck in both the House and Senate amid heated opposition by the bankers. Credit unions have been lobbying Congress to raise the 12.25% cap since its enactment--at the behest of the bankers--as part of HR 1151, the 1998 CU Membership Access Act.

 

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