Speaking before the New York Senate’s standing committees on Banks and Commerce, Economic Development and Small Business, Henry Meier, the New York Credit Union Association’s senior vice president/general counsel, said that the federal government’s efforts at combating the pandemic — while helpful to many small businesses — could be improved upon.
Meier made his remarks last week during a virtual discussion focusing on access to capital for small businesses during the COVID-19 pandemic.
While the SBA’s Paycheck Protection Program is well-intended and has helped many small businesses, numerous problems has have lessened its effectiveness, particularly for those small businesses most in need of help, Meier said. “For example, a key component of the PPP is that it authorizes businesses that meet certain criteria to have their loans forgiven. But even though borrowers could apply for loan forgiveness starting on August 10, as of October 1, the SBA had yet to forgive a single loan.”
Meier also said that the PPP is too complex and the federal government has had difficulty assisting small businesses. In finding ways to further help small businesses, he said that some important priorities should be kept in mind.
First, the state should maximize the flexibility of credit unions to participate on a level playing field with banks when it comes to providing small business loans. The businesses that obtained the on-average $67,000 loans from credit unions were only able to do so because they fell within a credit union’s field of membership — and now is not the time to be denying loans to small businesses based on legal technicalities, Meier said.
Under existing state law, credit unions can apply to provide services to underserved areas that fall outside their field of membership. In the coming weeks, the Association will be advocating for legislation which that allows credit unions to provide services to consumers and businesses which that fall outside their field of membership but who have been impacted by COVID-19, he said.
Second, Meier said that support should be given to businesses without imposing new mandates on lenders. “Just as businesses are facing tough times right now, so are many small credit unions. The legislature should avoid the temptation of imposing additional mandates on lending institutions and instead concentrate on programs that provide support for small businesses.”
Finally, Meier said that the federal government needs to act. He said that the Association will continue to advocate for legislation that grants automatic forgiveness to any member who received a PPP loan of $150,000 or less and also support federal efforts aimed at increasing the flexibility of credit unions seeking to help localities and members who fall outside their field of membership.
“A comprehensive approach to small business lending will not only be of immediate benefit to small businesses across New York state, but will also help lay the groundwork for a quicker and more vibrant economic recovery,” Meier said. “Small businesses tend to expand quicker and grow faster than established businesses. A well-timed package of loan programs will help set the groundwork for the post-COVID era, which we all hope will arrive sooner rather than later.”