Navigating the Closure of SBA Complete: Strategies for Credit Unions

By Ken Lowy, NewtekOne
May 29, 2024

As of May 10, 2024, SBA Complete, one of the more prominent loan services providers (LSP) in the U.S., has officially canceled its services. It's a major disruption causing a lot of challenges for credit unions and other lenders. In this article, we'll investigate the impact of the closure, how to navigate a sea of looming uncertainty, and provide some actionable strategies for the future.

Understanding the Implications of SBA Complete's Closure

Immediate Effects on Credit Unions

SBA Complete's sudden cessation of services had an immediate effect on credit unions and other lenders including:

• Disrupted loan processing: Including all the steps required to prepare and complete a loan application, such as data collection, verification, underwriting, and submissions of approval.
• Hindered loan servicing: Including the management of the loan after approval, such as collecting payments, handling customer service inquiries, managing escrow accounts, and ensuring compliance with regulatory bodies.
• Inhibited loan approvals: The final step in the loan process where the application is reviewed and approved or disapproved at underwriting.

All of this adds to an increased administrative burden on credit union staff and increases the risk of failing to meet SBA regulatory compliance.

Broader Impact on the SBA Loan Market

SBA Complete ceasing services is a severe economic disruption that has the potential to cause ripple effects across the broader SBA loan market. One immediate effect could be the slowdown in issuing SBA loans. Should that happen, it will have a potentially devastating effect on the 33.3 million small businesses in the US that rely on these loans for growth and operations. This in turn will affect the 61.6 million employees – 47.1 percent of the private workforce.

Considering small businesses contribute over $16.2 trillion to the US economy, disruptions in getting SBA loans could have catastrophic economic impacts (SBA.gov) (First Bank). And according to a November 2023 report from PYMNTS, only 47% of mid-sized businesses have financing sources and sufficient access to credit. It's even worse in smaller businesses, where just 28% have access to corporate credit cards. Toss in a volatile election year, and one can imagine a perfect storm brewing for the remainder of 2024 heading into 2025.

Strategies Adopted by Credit Unions

Contingency Plans: Seeking Alternative LSPs and Partnerships

Finance can be a fickle industry. SBA Complete's failure is case in point. For that reason alone, credit unions need contingency plans that include backup LSPs. But it goes beyond just that. Preparing for potential future disruptions is also needed for long-term resilience (SBA.gov).

Enhancing Internal Capabilities for SBA Loan Management

Now, perhaps more than ever in the wake of SBA Complete's shutdown, investing in internal loan capabilities is critical for credit unions. Investing in staff training, increasing AI-based technology, and dialing in loan management systems feel more like a requirement rather than an option. Key areas of focus Include:

1. Training and Development:

• Comprehensive Training Programs: A refocus on staff training on SBA loan processes, regulatory requirements, and best practices is needed. Expose staff to updated workshops, seminars, and online courses that are focused on SBA lending.
• Ongoing Professional Development: Continuous education has never been more important. Offering certification programs and gamification practices can help keep employees motivated and updated on the latest industry standards and regulatory changes.

2. Investment in Technology:

• AI-Based Loan Application Systems: Getting better at leveraging artificial intelligence (AI) can go a long way in streamlining the loan application process. AI is already famous for its ability to automate data, verify, and initiate the underwriting process. reducing the time and effort required from staff.
• Loan Management Software: Implement loan management systems and automate as many aspects of the loan process as possible. Let these systems manage loan applications, track compliance, generate reports, and improve your staff's efficiency. It can also help eliminate human error.
• Digital Document Management: Digital platforms reduce the risk of lost or misplaced documents and ensure that all necessary paperwork is readily available for audits and compliance checks.

3. Process Improvement:

• Standardized Procedures: Getting procedures standardized can help staff reduce the risk of errors.
• Workflow Automation: Automating tasks such as payment collections, compliance checks, and document submissions can ease the burden of operations and manual work.

4. Compliance and Risk Management:

• Real-Time Monitoring: Real-time monitoring can help credit unions stay ahead of potential risks. Automated systems can track regulatory changes, monitor loan performance, and ensure adherence to SBA guidelines.
• Risk Assessment Tools: Advanced risk assessment tools can help identify potential risks in the loan process by looking over borrower data, market conditions, and loan history to help manage risk.

Benefits of Enhancing Internal Capabilities:

• Improved Efficiency: Once implemented and optimized, automation can reduce both time and effort required to process loans. This means staff can handle higher volumes of loans without compromising on quality or increasing risk.
• Enhanced Compliance: The right technology along with continuing education goes a long way in making sure all loan activities adhere to SBA regulations and guidelines.
• Better Customer Service: When a credit union can provide efficient loan processing with quick turnaround times, it builds trust and improves customer satisfaction.
• Scalability: Investing in scalable technology allows credit unions to grow their SBA loan portfolios. Over time, the cost is insignificant in comparison to the potential long-term growth and retention of clients.

It's now inevitable. The closure of SBA Complete adds to the challenges credit unions and lenders face moving into the future. That's why it's critical for credit unions to begin aggressively adopting strategies, improving internal capabilities, and leveraging readily available resources. Now, perhaps more than ever, it's crucial to stay informed, prepared, and resilient in the face of continuing disruptions.

As one of the largest SBA lenders in the US, NewtekOne offers an LSP solution backed by knowledgeable staff who have processed over $3 billion in loans. With over 20 years of experience, the NewtekOne team is here to help and answer any questions you may have. As subject matter experts, we are committed to ensuring you achieve your desired outcomes during this disruption.

Connect with NewtekOne to learn more.

About NewtekOne

From lending and payments to payroll, insurance, and technology, NewtekOne provides leading business solutions to credit unions and their members.