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SBA Joins Forces With Credit Unions To Expand Small Business Lending

Written by Ken Gaebler
Published: 2/17/2015

Joint partnership between the SBA and NCUA will make it easier for small business owners to access small dollar loans from credit unions.

Entrepreneurs and small business owners interested in getting business loans from credit unions may soon receive a boost, thanks to a new agreement between two of the nation's largest players in small business finance.

SBA Credit Union Partnership

The Small Business Administration (SBA) and National Credit Union Administration (NCUA) recently signed a Memorandum of Understanding that will open new lending opportunities and expand access to capital for small businesses.

The demand for SBA loans at credit unions is steadily rising. Since 2011, the outstanding balance of SBA loans provided by credit unions has increased significantly, from $810 million to $1.2 billion. The new partnership between the SBA and NCUA is designed to increase lending even further, with a focus on small dollar SBA loans less than $50,000.

"A unique aspect of the SBA and NCUA partnership is that SBA small dollar loans do not count against credit unions' business loan cap, so they are well suited to expanding access to these loans. This provides flexibility to credit unions to distribute small dollar loans, increasing access to capital to local economies and enriching the entrepreneurial communities which credit unions serve," SBA Administrator Maria Contreras-Sweet said in a statement.

Credit unions have historically been an effective financing resource for small businesses in local communities. The partnership between SBA and NCUA will help credit unions further extend their focus on local community businesses, including minority-owned businesses located in underserved communities.

The SBA also expects the partnership to increase lending opportunities for encore entrepreneurs, i.e., entrepreneurs starting businesses after successful careers working for someone else. The fastest growing segment of entrepreneurs are individuals age 50 and over. Combined with the fact that the average credit union member is 50 years old, this positions credit unions as an important source of capital for the nation's most rapidly growing entrepreneurial segment.

"This is a tremendous opportunity for credit unions and small business owners," said Debbie Matz. NCUA board chairman. "SBA-guaranteed loans made by credit unions provide needed capital for existing small businesses and start-ups that might have difficulty obtaining loans from other institutions ...There is a vast untapped capacity for credit unions to make more SBA loans. This initiative will help us unlock that capacity and put it to work for credit unions, their members and their communities."

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