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How to Support Small Businesses in These Challenging Times

female clothing store owner at counter
Contributing Writer
member of Bellco Credit Union

4 minutes

With one deadline Friday, credit unions examine COVID-19 relief program options to help them serve their business members.

Editor’s note: The SBA lending landscape has already changed since this blog was posted and we've done our best to update this content. However, please be sure to consult with the official SBA website to learn the latest developments. Also, please considering adding your thoughts in the comments on this post. In addition, here's a resource for member businesses that own commercial real estate.

For a listing of COVID support for small businesses in Canada, visit this link.

The government is moving fast to keep small businesses viable with emergency loans through the U.S. Small Business Administration. One program attracting a lot of attention is scheduled to go live April 3. It seems that CUs will be eligible to participate. 

Credit unions can sign up for the programs immediately and reach out to member businesses or wait to be approached. Either way, it could be a big surge in workload. 

“I would imagine that there will literally be thousands of these loan requests made by small businesses pouring into banks and credit unions in the next few weeks,” says Jim Devine, CEO of Hipereon Inc., Kirkland, Washington, and longtime lead presenter at CUES School of Business Lending.

Most likely, the SBA will leverage the Disaster Business Loan Application it already has in place, he says. To expedite the application process, the SBA is expected to make a condensed application available very soon.  

SBA also is revising program requirements to allow Express Bridge Pilot loans made under the COVID-19 Emergency Declaration to be approved through March 13, 2021.

Devine says it will be interesting to see how this rolls out and gets documented. 

Do CUs have plans in place to respond to the many credit requests that may come in over the next few weeks? he asks. Recent guidance suggests all federally insured credit unions will be eligible to participate.

Small businesses with acute liquidity needs have two primary options, adds Larry Middleman, president, CEO and founder of CU Business Group LLC, a credit union service organization based in Portland, Oregon:

  1. They can seek a modest line of credit from the CU where they have a term loan. “Credit unions are entertaining these requests, based on normal credit criteria,” he says.
  2. They can apply for credit under a U.S. government COVID-19 relief program distributed by the U.S. Department of the Treasury through the SBA. 

There are several programs, Middleman explains, but the one getting the most attention for quick liquidity relief, called the Paycheck Protection Program, provides funds for payroll and the essential expenses of keeping the business up and running, such as utilities and rent. At the end of the loan term, SBA will forgive the portion of the loan that has been used for approved expenses. This makes the loan more of a deferred grant.

“At this point in time, it does not appear that there will be much, if any, underwriting upfront by the lending institution," Middleman adds. "The business will need to make the proper calculations and then make a number of assertions that all info is accurate, true and correct, we are a legitimate business, etc. The work for the borrower and CU will be more on the back end to prove the money was used for approved purposes, at which point the loan will be forgiven by SBA/Treasury. That will take place approximately eight weeks from now when the loans reach the point of potential forgiveness.”

Will this be a major marketing and growth opportunity for credit unions? Middleman doesn’t think so. 

“This will be an opportunity to protect existing business, loans already on the books,” he says. “I don’t think many credit unions will see it as a marketing opportunity. In fact, some CUs will refer members who want those loans to another lender, typically a larger bank or credit union that is already an approved SBA lender.”

But Richard Crone thinks a growth bonanza is more likely. The founder of Crone Consulting in San Marcos, California, says:

“Time is of the essence now. According to the Wall Street Journal, financial institutions need to be ready by April 3 to issue the SBA payroll loans. Challenger banks are already advertising their totally online application process for the loans. Credit unions need to be made aware of what they could do to use these loans to attract new business members and expand their loan portfolios.” He suggests checking out this article.

“We are evaluating it, even though we are not an approved SBA lender,” reports CUES member Bill Vogeney, chief revenue officer of $6.2 billion Ent Credit Union, Colorado Springs, Colorado. 

“The guidance and procedures from SBA supposedly will be released on April 3,” he notes. “If we can stand this up in seven to 10 days, we will consider it, but it may be a Herculean task. We don’t see it as a marketing opportunity, but as a different way of assisting our members.”

It’s not something to rush into, other credit unions are saying. 

“We are always looking for opportunities to grow market share,” reports Andrew Patton, VP/commercial lending at the $650 million Align Credit Union, Lowell, Massachusetts. “In this particular case, we are waiting to learn more about the new SBA program and then will decide how to best offer it to our current business members and potential new members in the communities we serve.”

Richard H. Gamble writes from Grand Junction, Colorado.

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