SBA Direct Loans Should Be Withdrawn From Reconciliation | 2021-11-17

CUNA on Wednesday joined organizations calling on congressional leaders to remove a provision allowing the Small Business Administration (SBA) to become a direct lender of the reconciliation framework. The proposal would allow the SBA to offer loans of $ 150,000 or less directly to small businesses or through partnerships with third parties.

“We are concerned that this new government-run program will undermine existing public-private partnership SBA loan programs, while potentially limiting access to capital for smaller small businesses due to increased complexity,” the letter said, adding that the legislation provides about $ 2 billion over a 10-year window for the program and 90 days to enact the rules.

“The complexity of setting up a loan program in such a short time frame will lead to many problems that could ultimately drive potential applicants away from any type of SBA loan,” the letter said.

CUNA notes that the SBA’s earlier efforts to engage in direct loans “encountered high rates of fraud and default” and that the subsidy rate for direct loans was “considerably higher” than the rate. subsidy loan guarantee programs.

“The regulatory guarantees that exist for financial institutions have proven to be a much better protection against fraud and defaults than programs managed by the SBA,” the letter adds.

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