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As part of its markup of its section of the Democratic budget reconciliation package, the Build Back Better Act, the House Small Business Committee late last week approved legislation that included a proposal to grant the Small Business Administration (SBA) new direct-lending abilities.  Under the provisions in the bill, the SBA could make 7(a) loans of $150,000 or less directly to borrowers or “through partnerships with third parties”.

House Small Business Committee Chairwoman Nydia Velázquez (D-NY) and Senate Small Business Committee Chairman Ben Cardin (D-MD) have indicated that the intent of this proposal is to expand access to smaller dollar credit for small businesses, some of whom were missed in the initial phase of the paycheck protection program (PPP).

The “Build Back Better” package, still undergoing reconciliation process in Congress, would provide the SBA with nearly $4.5 billion to create this new program.

While the legislation leaves a lot of the details of the new program to SBA, the package includes provisions would allow SBA to originate and disburse direct loans under this program, should it choose to, or use financial institutions to offer the loans and allow them to collect fees and cover costs for helping distribute and offer the loans. 

“I want the SBA to create new channels to offer direct lending, that’s what is being considered in Congress right now,” said SBA Administrator Isabella Casillas Guzman this week at NAFCU’s Congressional Caucus. 

NAFCU expressed concerns about the provisions that would allow the SBA to offer loans directly to the market in competition to credit unions. 

“While we do not believe the SBA should be making loans directly, we stand ready to work with Chairwoman Velázquez and Chairman Cardin to make it clear that the SBA should continue to partner with credit unions and other community financial institutions. We look forward to helping them achieve their goal of getting additional credit to small businesses,” stated NAFCU Director of Regulatory Affairs Ann Kossachev. 

Kossachev did note that “We strongly support efforts to ensure the nation’s Main Street small businesses have access to the credit they need to finance their operations,” and NAFCU continues to believe that credit unions are the best option for that.

NAFCU’s advocacy team is working with SBA and Congress to ensure that SBA continues its partnerships with community financial institutions, including credit unions, but does not become a direct lender itself. Stay updated on the latest information regarding SBA direct lending here.