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NAFCU reiterates concerns with SBA direct lending to Senate
NAFCU joined with several financial services trade organizations Wednesday to alert the Senate that the proposal to grant the Small Business Administration (SBA) direct lending authority currently included in the Build Back Better Act (BBBA) "will undermine existing successfully public-private partnership SBA loan programs while potentially limiting access to capital for those smallest of the small businesses due to increased complexity."
Under the proposal, the SBA would be able to offer loans of $150,000 or less directly to small businesses. Instead, the organizations suggested the SBA be given the necessary funds and resources to bolster the successful 7(a) program.
"By expanding the existing pool of SBA lenders, providing greater education to small business owners, and committing more resources to reduce application waits, Congress can take proactive steps to ensure more access to capital without undermining existing relationships between financial institutions and their customers," wrote the authors.
In addition, the group noted that when the SBA has previously chosen to engage in direct lending, it has been met with high rates of fraud and defaults.
"For these reasons, we urge you to remove the direct lending program provisions from the BBBA when the Senate considers this legislation later this month," concluded the group.
Relatedly, Ranking Member of the House Small Business Committee and Consumer Protections and Financial institutions Subcommittee Rep. Blaine Luetkemeyer, R-Mo., along with Rep. French Hill, R-Ark., wrote to SBA Administrator Isabel Casillas Guzman urging the SBA to stop its direct lending efforts "to allow the private sector lenders to do their job."
NAFCU has expressed major concerns over the SBA direct lending program proposal since its introduction, engaging with Congress on multiple occasions explaining why it should be excluded from BBBA. In an op-ed for American Banker, NAFCU President and CEO Dan Berger called the proposal a “flawed solution that puts taxpayers at risk and could lead to a decrease in lending to small businesses by the private sector.”
NAFCU remains engaged with the SBA and Congressional leaders to voice credit union concerns around the proposal.