Small Business Lending Provides Big Opportunities for Credit Unions

According to the Small Business Administration, small businesses are 99.7% of all businesses in the United States. Small business is the backbone of the economy, and the American Rescue Plan presents credit unions with big opportunities to support their local SMBs and their local economies.

CUs as Participating Lenders

The American Rescue Plan Act, enacted in 2021, has funded the State Small Business Credit Initiative (SSBCI), which provides nearly $90 million for programs set aside small business in Louisiana.

As we emerge from the pandemic, these programs have been created to give SMBs access to capital, to encourage entrepreneurship, and to support underserved communities. Louisiana credit unions are in a unique position to apply as a participating lender to make these fund available in their local economies and create and reinforce local business relationships.

Revolving Loan Fund (Micro Lending Program)

Out of the SSBCI funding, the Louisiana Micro Lending Program (MLP) has been created as a loan participation structured as a revolving loan fund.  This is designed to provide financial assistance through short-term loans and lines of credit for the development and expansion of small businesses in the state.

For credit unions applying to partner on the micro loan program, must meet all requirements, such as:

“i. Having a primary mission of community development, and its predominant business activity is the provision of loans, and

ii. Serves an underserved investment area or targeted population meeting the description as outlined by Treasury in its definition of SEDI-owned businesses and CDFI Investment Areas as outlined in Appendix A”

Venture Capital Program and Seed Capital Program

LED is also using SSBCI funds to build a sustainable program to support small businesses in Louisiana, particularly to those SMBs owned by Socially and Economically Disadvantaged Individuals and Very Small Businesses as defined by U.S. Treasury.

Credit unions can apply to partner with LED to get these funds to SMBs and businesses in underserved communities affected by the pandemic.  Among other considerations, credit unions applying to partner on these programs must:

“Each entity must have qualified and experienced management personnel in the industry. Each member should have at least three years of experience managing investments in individual, privately-held companies, and utilizing funds provided by others to make such investments”

CUs Can Win with Small Business Lending

Credit unions have opportunities to win through small business lending. Having these programs available is a strong tool for cultivating valuable relationships with local business owners.