Small Business: SBA adds credit unions to list of approved lenders

Sam Jones is the Region VII SBA Administrator.

The U.S. Small Business Administration has expanded its lending program to allow greater access to capital for small businesses by now allowing allow credit unions to join the loan delivery system for small business.

The SBA estimates that as many as 1,500 of America's more than 10,000 credit unions nationally are likely to join our network of lenders.

This represents a potential increase of 30 percent in the overall number of storefronts where entrepreneurs can seek capital for their business. In Region VII, whether in the metropolitan areas or the mid-sized communities like Springfield, we can expect a similar percentage of the credit unions to take steps to participate in our lending programs.

There are 12 credit unions in Springfield with 20 locations. This translates to between four and six new storefronts that can be expected to offer SBA loan products.

In many rural communities, this may add only one new public lending source; in others it will add 10 or more. Yet, these may be the sources of which the borrowers in small business are most aware giving them more access to capital more easily and conveniently in times of need.

Previously, SBA had only allowed participation by credit unions that defined their membership limits by geographical boundaries, often referred to as community credit unions.

The new SBA decision allows all credit unions to participate as long as they do not discriminate within their own membership.

As part of President Bush's overall management agenda, agencies across the federal government have been tasked with finding ways to better manage for results. This move to include more credit unions in our business loan program will help transform the agency into a more responsive, customer-centric organization and increase our effective and efficient operation.

Building on our existing network of lenders, we can reach more communities, a greater number of entrepreneurs and a more diverse pool of prospective and existing small-business men and women. SBA's first priority is to reach as many small businesses as possible. Expanding the number of lending partners helps accomplish that.

The SBA has 84 credit unions participating in the 7(a) program. Over time, they have made more than $71 million in SBA-backed small-business loans. In 2001, SBA had approximately 74 credit union members in the 7(a) program. Of those, 17 lenders made a total of 97 SBA loans for about $13 million.

The average loan was $134,000. In the short term, we do not expect to have a high enough volume of loans to affect our lending. But, perhaps in the future, the SBA will need more lending authority because of increased demand.

And, although the numbers of credit unions servicing small business through loans is growing fairly quickly, we do not expect to be swamped with applications overnight.

According to industry numbers, of 10,000 credit unions about 1,500 already make business loans to their members. We believe those are likely applicants to SBA. That represents a potential increase of some 30 percent in the overall number of storefronts where entrepreneurs can seek capital for their business.

One of SBA's lending goals is to make more small loans to the small-business community. The credit union industry serves 80 million members that are potential small-business owners with a need for commercial capital. Credit unions serve small businesses across America, in both rural and urban settings, making small loans to small businesses and have a reach into communities that have not been as well served by existing program participants, particularly in low- and moderate-income communities, in inner cities and in rural areas. We can't ignore their ability to reach a more diverse pool of prospective and existing small-business men and women.

At SBA, we look at the inclusion of credit unions into our lending program as a complement, rather than a competition, to the SBA business other lending institutions have accomplished over the years.

As SBA's National Administrator Hector V. Barreto said, "We are grateful for the tremendous contributions our lending partners have made to bolstering and encouraging entrepreneurship. Since 1953 they have helped provide more than $175 billion dollars in financing to make small business dreams a reality. As our network of lenders grows, so does our ability to reach small businesses from rural to urban communities, so that we can maximize our ability to help make the American dream come true."