Increase Of $30 Million In Small Biz Lending Funding Urged

October 16, 2003

FOR IMMEDIATE RELEASE
Contact: Patrick Keefe, CUNA Communications
(202) 508-6765

An increase of $30 million for small business lending programs should be considered by House appropriators – particularly given that all credit unions may now become involved in the Small Business Administration loan program, CUNA told leaders of the House Appropriations Committee in a letter Wednesday.

In a letter to Appropriations Committee Chairman C.W. "Bill" Young, R-Florida (as well as to ranking member David Obey, D-Wis.), CUNA President and CEO Dan Mica told the committee leaders that CUNA is concerned that funding for the SBA loan program is being reduced. He pointed out that the Administration’s budget request for 2004 in this area is "considerably below the current level of loan approvals." He urged the appropriators 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.

"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." Mica stated.

The CUNA president pointed out that credit unions play a unique role in serving the needs of small business. "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," Mica wrote. "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."

The complete text of the letter (which was also sent to commerce subcommittee Chairman Frank Wolf, R-Va., and ranking member Jose Serrano, D-N.Y.) follows:

October 15, 2003

The Honorable Bill Young
Chairman, Committee on Appropriations
U.S. House of Representatives
H-218 The Capitol
Washington, D.C. 20515

Dear Chairman Young:

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.

Sincerely,
Daniel A. Mica
President & CEO
Credit Union National Association
Washington, DC

CC: The Honorable Donald Manzullo

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