SBA Credit Union Leaders in 2005

Which credit unions are using the Small Business Administration 7(a) program?

 
 

As of September 30, 2005, the U.S. Small Business Administration has approved 259 credit unions as participants in its 7(a) Lending Program.  Of the group, 93 credit unions have had at least one loan approved in FY 2005.  Below are the top 20 SBA credit union lenders by number of approved business loans through the first three quarters of 2005.  

SBA

CU

 

 

SBA

($) SBA

($) MBL

Rk

Rk

Credit Union

ST

Volume

Amount YTD

Originated YTD

1

23

Mountain America

UT

297

$11,221,800

$89,997,670

2

55

America First

UT

78

$2,755,800

$105,192,796

3

87

Coastway

RI

71

$14,630,500

$10,184,325

4

51

Telesis Community

CA

58

$17,155,200

$79,705,067

5

57

BECU

WA

57

$4,824,700

$33,285,260

6

816

Jordan

UT

50

$4,175,900

$236,596

7

497

Self-Help

NC

39

$3,110,860

$1,829,795

8

84

Greylock

MA

37

$3,757,200

$14,929,823

9

213

Tooele

UT

35

$1,726,500

$6,319,133

10

21

Citizens Community

ND

31

$1,867,900

$19,098,027

11

75

Community First

WI

31

$2,303,855

$26,397,205

12

261

Redstone

AL

30

$4,002,800

$3,389,162

13

218

Deseret First

UT

21

$1,096,600

$33,315,442

14

329

Security Service

TX

20

$2,113,200

$8,708,024

15

398

Alternatives

NY

19

$2,146,000

$1,613,221

16

454

Santa Cruz Community

CA

19

$924,000

$630,000

17

159

Community One

NV

16

$3,227,550

$3,600,742

18

107

Govt. Empl. CU of El Paso

TX

15

$539,400

$10,431,601

19

270

Vision One

CA

12

$2,364,000

$2,271,298

20

94

Chetco

OR

11

$1,303,000

$25,138,214

Source: Small Business Administration, Callahan & Associates

Credit unions continue to serve the small business market as small businesses’ capital needs are more in line with credit unions’ lending restrictions.  Most credit unions can only approve a loan of up to $1.5 million per relationship depending upon their internal policies, and the larger amounts have to be approved by the credit union’s loan committee and/or board.  Of the 93 active credit unions, the SBA approved 1,172 loans for a total of $122.7 million in FY 2005.  The average loan amount was $104,689. 

However, over 85 percent of the 1,759 credit unions that offer business loans do not participate in the SBA 7(a) program.  These institutions originated 41,452 business loans for a total of $6.08 billion as of the third quarter of 2005.  As these credit unions grow their business loan portfolio, they come closer to their regulatory limit, and may choose to either participate out some of their loans to other credit unions/CUSOs or work with the SBA. 

The noticeable difference between those who participate in the SBA program and those who do not was the average loan amount.  Credit unions that do not participate in the SBA 7(a) program approved an average loan of $179,043, 71 percent higher than the average SBA loan.  A plausible explanation for the discrepancy is that the SBA guarantees up to 85 percent of a loan up to $150,000 and 75 percent of loans over $150,000 to a maximum guarantee of $1.5 million.  Credit unions that participate in the 7(a) program are able to cover more of their risk in the lower tier and have less of an incentive to fund higher loan amounts. 

The benefit of the SBA 7(a) program is that only the non-guaranteed portion of the loan counts toward the regulatory loan limit, giving credit unions more liquidity and flexibility to accept qualified as well as borderline business loans.  However, the SBA requires both guarantee and servicing fees for the loans it accepts. 

Business loans grew 36.3 percent in the 12 months ending September 30, 2005, representing the fastest growing loan product on credit unions’ balance sheets.  For credit unions concerned about adding risk to their balance sheet, the SBA is a solution that allows credit unions to fulfill the business needs of their members rather than refer them to a competitor.  It will be interesting to monitor how many more credit unions participate in the SBA 7(a) program in 2006 as more credit unions begin offering business lending programs. 

 

 

 

Jan. 23, 2006


Comments

 
 
 
  • It puzzels me why Credit Union have not embraced SBA Lending. SBA Lending is not rocket science. It is a matter of making a committment to the lending program. Understanding, the benefits it provides to business owners. SBA lending is an excellent product and enables a credit union to cross sell other products. Most Credit Unions do not understand the benefits of this program to their institution. Unfortunately there are just a few sources to truely learn about the program. In addition, many credit unions are choosing the CUSO model for business lending. Many of the CUSOs do not have SBA capability. With the declines in consumer lending trends Credit Unions should add SBA Loans to their product list. Credit unions need to focus on protecting their market share from the competition. If I were a member of credit union and needed the long term benefits of an SBA loan and my credit union could not provide that I would more likely go to the local bank in the area. They would insist that my accounts be establised at the bank.
    Anonymous