WASHINGTON — The U.S. Small Business Administration (SBA) and NCUA have jointly announced a partnership aimed at encouraging credit unions to make more SBA-backed loans and urging small businesses to turn to CUs for such loans.
SBA Administrator Maria Contreras-Sweet and NCUA Chairman Debbie Matz signed a memorandum of understanding to "invest in America's entrepreneurial potential" by expanding the accessibility of small-dollar SBA loans from credit unions.
The U.S. has an estimated 28 million small businesses and "aspiring" entrepreneurs, the agencies said.
"A unique aspect of the SBA and NCUA partnership is that SBA small-dollar loans do not count against credit unions' business loan cap, so they are well suited to expanding access to these loans," Contreras-Sweet said in a statement. "This provides flexibility to credit unions to distribute small-dollar loans, increasing access to capital to local economies and enriching the entrepreneurial communities which credit unions serve."
Since 2011, Contreras-Sweet noted, the outstanding balance of SBA loans by credit unions has jumped by almost 50% — from $810 million to $1.2 billion.
"This signals a growing demand for SBA loan programs," she added. "Millions of Americans have used their credit union to finance their car, home or children's education. We want to empower credit unions to finance small business start-ups, too."
SBA further indicated that this partnership will help credit unions to "unlock their capacity" to deliver SBA guaranteed loans. The SBA added that it is making small- dollar loans a top priority in efforts to increase business lending and reach to underserved borrowers.
Once a loan is approved, SBA cited, it has a "vast network of resource partners," including SCORE, Women's Business Centers (WBCs), and Small Business Development Centers (SBDCs) to offer "free counseling and technical assistance to help small business owners deploy their working capital and grow their businesses and revenues."
Contreras-Sweet also explained that SBA will backstop the loans, while credit unions' long-term relationships with their members "put them in an ideal position to assess their character and creditworthiness."
Matz characterized the development as a "tremendous opportunity" for credit unions and small business owners.
"SBA-guaranteed loans made by credit unions provide needed capital for existing small businesses and start-ups that might have difficulty obtaining loans from other institutions," she said.
With a significant portion of principal guaranteed by the full faith and credit of the United States government, she added, SBA loans rank among credit unions' safest loans. There is a vast untapped capacity for credit unions to make more SBA loans."
The guaranteed portions of SBA-backed loans will not count against credit unions' statutory cap on member business lending. SBA guarantees range from 50% up to 90% of the principal of each loan, depending on the loan type, SBA added.
Another benefit of this partnership, the groups stated, is the expansion of access to capital to "encore entrepreneurs, individuals planning to start a business after earlier career endeavors."
They noted that the average age of credit union members is 47 and the fastest-growing group of entrepreneurs consists of men and women age 50 and above, "spurred by the low cost of starting a successful small business in the Internet age."
Under the MOU, NCUA and SBA will outline a series of "educational initiatives" over the next three years that include webinars, examiner training on SBA programs, data resources and media outreach.
NCUA and SBA have scheduled a joint webinar for credit union officials and NCUA staff for March 4 at 3 p.m. (EDT).