Letter to Representatives Bill Young Frank Wolf David Obey and Jose Serrano regarding the SBA 7a loan program

Letters to Congress

Letter to Representatives Bill Young, Frank Wolf, David Obey, and Jose Serrano regarding the SBA 7(a) loan program

October 15, 2003

The Honorable Bill Young, Frank Wolf, David Obey, and Jose Serrano
Appropriations Committee
U.S. House of Representatives
Washington, D.C. 20515

Dear Representatives:

On behalf of the Credit Union National Association (CUNA) and the nation's nearly 10,000 credit unions and 83 million credit union members, I would like to request your assistance in increasing fiscal year 2004 appropriations for the critical Small Business Administration (SBA) 7 (a) Loan Program.

On February 14, 2003, the SBA issued a legal opinion removing restrictions on the types of credit unions that may participate as lenders in the SBA 7 (a) Loan Program. This is great news for both credit unions and small businesses. The average member business loan from a credit union is approximately $118,000. Many small businesses have difficulty obtaining loans of this size from other lenders. Credit unions play a unique role in serving the needs of small businesses. The U.S. Treasury conducted a study in January 2001 that demonstrated that credit union member business lending is more highly regulated than the business lending operations of commercial banks or other traditional financial institutions. The study also showed that these loans often have a lower rate of delinquency and charge-offs than bank commercial loans. That is because credit unions develop a member relationship with the borrower and are often willing to work with the small business borrowers to address problems before drastic action is necessary.

Although CUNA is extremely pleased that credit unions have expanded their ability to work with small business owners, CUNA is deeply concerned that funding for this crucial program is being reduced. Increased funding is particularly needed now, since this is a time in which jobs are scarce, and Americans are trying to achieve their dream of owning their own business.

Both the Administration's fiscal year 2004 Budget Request and the Fiscal Year 2004 Appropriations Bill for the Departments of Commerce, Justice and State are considerably below the current level of loan approvals as well as the amount of loan requests estimated for next year. On behalf of CUNA, I urge you to support a $30 million increase above the House appropriation of $84.5 million in order to support approximately $12 billion in SBA 7(a) loans.

Without additional appropriations to address the FY 2004 demand, the SBA will have to take administrative action to limit demand for loans and exclude borrowers from the program. I urge you to make every effort to help credit unions provide the necessary resources to America's small business owners, so that they can achieve their goals and dreams.

Daniel A. Mica
President & CEO

CC: The Honorable Donald Manzullo

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