Senate bill would prohibit SBA from making direct 7(a) loans

Credit unions support a bill introduced this week by Senate Banking Committee Chair Tim Scott, R-S.C., that would ensure credit unions can continue as a source of capital for small businesses. The Protecting Access to Credit for Small Businesses Act prohibits the Small Business Administration (SBA) from making direct loans through its 7(a) program.  

Loans made through the 7(a) program are up to 85% guaranteed by the federal government, with the guaranteed portion of the loan not counting against a credit union’s member business lending cap.  

“Financial inclusion and access to capital for entrepreneurs are critical in ensuring the growth and development of vibrant small businesses. The SBA government guaranteed lending programs, like 7(a), demonstrate successful public-private partnerships that work as borrowers can obtain loans from credit unions that they know and trust,” said Jim Nussle, America's Credit Unions president/CEO. “Direct lending from the SBA would invalidate this partnership, driving up program costs and disincentivizing 7(a) Loan Program authorization within financial institutions. America’s Credit Unions is proud to protect consumer relationships by supporting Senator Tim Scott’s Protecting Access to Credit for Small Businesses Act, which seeks to prohibit the SBA from directly making loans under the 7(a) program.”  

Nussle wrote Scott in strong support of the bill, noting, “establishing and retaining a relationship with a credit union is the best way for a small business entrepreneur to partner with a provider of essential financial services.”

“The Carolinas Credit Union League fully supports Chairman Scott’s Protecting Access to Credit for Small Businesses Act,” said Dan Schline, President and CEO, Carolinas Credit Union League. “We greatly appreciate his leadership in ensuring small businesses can continue to access capital through mission-driven lenders like credit unions - institutions that truly understand and serve the unique needs of their communities, rather than relying on a one-size-fits-all approach.”

Credit unions have historically been one of the top institutions to make 7(a) loans, and America’s Credit Unions will continue to advocate for additional ways to allow credit unions to provide small businesses with needed capital.