January 17, 2018

McDonald to Congress: Providing loans to members in need 'is what credit unions are here for'

NAFCU witness Sonya McDonald yesterday told members of the House Small Business Committee that providing loans and financial services to consumers in need "is what credit unions are here for." McDonald was testifying before the committee on how to strengthen the Small Business Administration's (SBA) 7(a) loan program.

Throughout her testimony, McDonald, executive vice president and chief lending officer at Randolph-Brooks Federal Credit Union (Live Oak, Texas), highlighted the value credit unions provide to the nation's small businesses.

She noted that her credit union started its business lending program because its members recognized the value of their personal financial services and wanted assistance with their business needs.

"We have tremendous member loyalty," McDonald said when asked how Randolph-Brooks FCU is expanding its 7(a) lending. "When you provide something for a member that they weren't able to get somewhere else, they go home and tell their family, they tell their friends."

When asked by committee member Dwight Evans, D-Pa., how the SBA's 7(a) loan program could be improved, McDonald said the legislation up for discussion, the Small Business 7(a) Lending Oversight Reform Act (H.R. 4743), was a great start as it codifies the "credit-elsewhere" test.

"From a credit union perspective, increasing the member business loan (MBL) cap would help," McDonald added. "There are a number of credit unions that don't participate in the [7(a)] program because it takes a lot to get started … If their program becomes wildly successful, they eventually have to cut back because of the cap and that doesn't do anything for the members."

McDonald also recommended that H.R. 4743 be amended to address unclear penalty definitions. She said if it's a minor compliance error, she would like to see the SBA notify the institution of the mistake first before issuing a penalty.

In her testimony, McDonald shared that Randolph-Brooks FCU has been the No. 1 SBA lending credit union in its 55-county SBA district the past two years.

"From start-up franchises, to business acquisitions, to purchasing owner-occupied real estate, RBFCU has provided SBA loans for as little as $15,000 and as much as $3,000,000," McDonald stated. "SBA products allow us to leverage our lending dollars, mitigate the risk associated with the loans, and extend more credit to our communities' small businesses."

When asked about the SBA loan application process, McDonald said that even as a preferred SBA lender, it can take up to eight weeks to process some loans if they have to submit paperwork.

"There is a perception that SBA loans are onerous and take a lot of time," McDonald said in response to a question about the challenges of making SBA programs more attractive. "But the benefits [the loan] provides to the member is what helps us sell the program."