Bloomberg notes credit unions’ strong support for small business hurt by cap
A Bloomberg Business Week article cites the strong support credit unions provided small businesses during the Great Recession, and credited them with picking up the slack created as banks clamped down on credit to small business owners. But the article notes the statutory member business lending (MBL) cap is constraining credit unions' ability to keep lending.
The article warned that a new Biz2Credit Small Business Lending Index shows some decline in that activity by credit unions. The 12.25%-of-assets member business lending cap is one of the top reasons for this funding squeeze, Bloomberg noted. Bloomberg reported that credit unions are working hard to convince the U.S. Congress to ease the lending restrictions.
Also, Credit Union National Association (CUNA) Chief Economist Bill Hampel explained in the article that the Biz2Credit statistics are different than figures from the National Credit Union Administration (NCUA), whose data for the first quarter of 2013 show that credit unions made $3.9 billion in business loans early this year, an increase from the $3.1 billion total reported in the first quarter of 2012.
"A lot of small business lending is relationship-based and requires local knowledge," Hampel told Bloomberg. Biz2Credit's surveying method may not create an accurate representation of credit union loan application volume, he added.
CUNA continues to call on Congress to help credit unions and the economy at large by approving MBL cap increase legislation. U.S. House (H.R. 688) and Senate (S. 968) bills would increase the credit union MBL cap from 12.25% of assets to 27.5%. CUNA has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers and without increasing the size of government.
S. 968, which was introduced by Senator Mark Udall (D-CO) in mid-May, currently has 15 co-sponsors. H.R. 688, introduced by Representative Ed Royce (R-CA) and co-sponsor Representative Carolyn McCarthy (D-NY), has 102 co-sponsors.
More than 500 credit unions are at or quickly approaching the cap, accounting for approximately 60% of credit union business lending, CUNA President/CEO Bill Cheney noted in a letter to Congress early this month. "If the cap is not increased, the ability of these credit unions to continue to be there for their small business-owning members will be jeopardized," he added.