Main Street needs Congress to lift credit unions’ business-lending cap

April 22, 2012

While the stock market is up so far this year, Main Street communities across the country are still anxiously waiting for the catalyst that will jumpstart their economies and create jobs.

Small businesses nationwide have been stymied from expanding and adding new jobs. The limited availability of capital from banks has hampered their efforts. While credit unions — not-for-profit, member-owned financial institutions — have been devoting more funds to loans for small companies, they are prevented from doing more because of an arbitrary cap on their business lending.

Recently, legislation was reintroduced by Sen. Mark Udall (D-Colo.) (S. 2231, Small Business Lending Enhancement Act) that would help small businesses gain access to much-needed capital by raising the member business lending cap credit unions currently face. Identical legislation (H.R. 1418) was introduced by Rep. Ed Royce (R-Calif.) and Rep. Carolyn McCarthy (D-N.Y.). At its most basic level, restricting credit unions on the amount of business lending they can provide undermines job creation. The Treasury Department and the National Credit Union Administration have both signed off on this common sense measure that could spur more than $13 billion in new lending and create more than 140,000 new jobs in the first year alone at no cost to taxpayers.

Current data underscore the need for credit unions to offer more loans to their small-business members, particularly the smaller dollar loans which banks are not making. In a recent survey, credit unions reported that 44 percent of their portfolio was made up of loans of less than $100,000, compared with banks that only have 8 percent of their lending in this size category.

Additionally, credit unions said loans between $100,000 to $250,000 were 20 percent of their portfolio, compared with 6 percent for banks. By contrast, business loans of more than $1 million make up 68 percent of the banks’ portfolios, but only 16 percent for credit unions.

The federal government made several attempts to boost business lending through the 2009 stimulus bill, the 2010 Small Business Jobs Act and “credit enhancements” that pumped up the Small Business Administration’s loan guarantee rate. Yet none of these vehicles have made significant progress in improving small businesses’s access to capital. Of the $30 billion apportioned in the Small Business Lending Fund, only $4.8 billion was actually dispersed.

Given the fact that these other attempts have fallen short, shouldn’t the government give small-business owners a chance to thrive through greater access to capital? Lifting the business lending cap on credit unions is a win-win for America’s small business and our nation’s economy.

We hope the Senate realizes the importance of this legislation and passes the Small Business Lending Enhancement Act. It is a fair and rational approach to helping Main Street’s small businesses, the backbone of our communities and the key to our financial future.

Fred R. Becker Jr. is president and chief executive of the National Association of Federal Credit Unions.

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