CUNA unveiled a new program last week that will allow credit unions of all sizes to access the U.S. Small Business Administration's guaranteed loan program through an SBA-certified lender.
The pilot program aims to take advantage of the SBA's ruling last month expanding eligibility for the agency's 7 (a) guarantee program to all credit unions, according to CUNA President Dan Mica, who introduced it during last week's GAC. "This is something we have heard all over the country that there is a need for," said Mica. "It cuts through all lines, all sizes of credit unions."
The CUNA program will allow credit unions to tap into the federal guarantee without having to go through the costly and time-consuming process of getting approved by the SBA on their own, noted Mica.
Under the program, credit unions can team with NewTek Small Business Financial Services, a unit of New York-based NewTek Business Services, which acquired one of just 14 SBA-certified non-depositories in January. NewTek Small Business, which is headed by John Cox, a 30-year SBA veteran, will provide any one of a variety of services for credit unions wanting to tap into the federal guarantee program, including marketing, originations, servicing, collections, accounting or liquidations.
Cox said his SBA experience has enabled him to understand the nature of both small business needs and of CU member business lending, most of which is focused on small loans. "A lot of credit unions do not have the wherewithal to make small business loans. This satisfies that," he said.
The new service will open up a wide range of possibilities for credit unions who will be able to offer additional products and services to small businesses, such as payroll, investments, or other services aimed at the businesses employees, noted Cox. "They can cross-sell other products and services to the business owner," he said.
Introduction of the new program comes just a week after the SBA reversed its decade-old stance and expanded its eligibility requirements from just community- based credit unions to make all credit unions eligible to join.
With the ink still drying on that SBA ruling, CUNA saw it as an opportune time to introduce the new program, which will be run as a pilot for the next 30- days before broader introduction is planned, said Mica. "CUNA has been anticipating that this decision might arrive," he said. "To that end, we have been working with potential partners to be ready to go."
Partly because of numerous barriers, such as the SBA's restrictions, business lending has not been broadly adopted among credit unions, with fewer than 20% of all credit unions having some kind of business lending program, noted Mica. And member business loans continue to make up less than 2% of credit union loan portfolios.
The program will be available to all credit unions, not just CUNA members, said Mica.