Credit unions and the U.S. Small Business Administration share a common goal, but an “antiquated and arbitrary member business lending cap” is preventing the movement from fully realizing its potential and providing more support to small businesses.
That’s the message from Natasha Merz, VP of commercial lending at Newport News, Va.-based Langley Federal Credit Union, who testified today before the House Small Business subcommittee at a hearing on the SBA’s 504/CDC Loan Program and the value that credit unions provide to America’s small businesses.
According to its most recent call report, Langley FCU has more than $110 million in member business loans on its books, $3.5 million of which is associated with various SBA lending programs.
In a transcript of prepared testimony provided by the National Association of Federally-Insured Credit Unions, Merz was expected to highlight how credit union SBA 504 lenders struggle with the MBL cap, which “can have its biggest impact on SBA 504 loans since the first mortgage issued by the credit union in a 504 loan is a regular commercial loan that counts toward the cap.”
Merz also cited a 2011 SBA study illustrating that during the financial crisis, credit union business lending increased as a percentage of total assets, while banks’ lending decreased – a fact she said “demonstrates not only the need for lifting the MBL cap in order to meet credit union members’ demand, but also that credit unions continued to meet the capital needs of their business members even during the most difficult of times.” And, she added, the SBA study found that bank business lending was largely unaffected by the increase in CU business lending.
In her testimony, Merz offered the subcommittee a number of ways the SBA’s 504 loan program could be improved, such as exempting 504 loans from counting toward the MBL cap and increasing the program’s flexibility. She was also expected to discuss NAFCU’s 2015 three-year memorandum of understanding with the SBA, which was aimed at helping credit unions boost member business lending through SBA micro-loan programs.
In 2015, SBA approved nearly 6,000 504/CDC loans totaling approximately $4.74 billion, and Merz also highlighted various ways her credit union has used the program to meet the needs of its small-business members.
“While the Small Business Administration’s 504/CDC program provides much needed opportunities to established and fledgling businesses, there are several relatively simple steps that could propel the program to its full potential,” said Merz. “We are confident this Subcommittee will do what is necessary to ensure that these programs are successful, while ensuring eligibility requirements and other qualifying criteria are not overly burdensome on the financial institutions that participate in them. We would urge Congress to ensure credit unions can meet the needs of their small business members.”
