Credit Unions and Small Business Lending

The following is an article and video shared by Winter Prosapio about credit unions and small business lending. A great read and powerful story. Watch and share with your friends. 

As posted on mysanantonio.com by David Hendricks noting that credit unions deserve a bigger role.

"One jobs bill already has been enacted by Congress, giving tax credits to employers who hire new workers.

As Congress mulls a second job-creating bill as mid-term elections approach, it ought to embrace a measure that wouldn't cost taxpayers a cent.

All Congress would have to do is lift the cap on business loans credit unions make for their commercially active members from 12.25 percent of loan portfolios to 25 percent.

Congress also should change the monetary boundaries of micro loans to from $50,000 to $250,000. Micro loans do not count against the current 12.25 percent cap on credit union member business loans.

The 12.25 percent change came in 1998 when Congress passed the Credit Union Membership Access Act. It was an arbitrary figure thrown in to appease the banking industry, which opposed expanded membership fields at credit unions.

The nation's credit unions have pressed for this change before. An effort in 2008 to raise the cap to 20 percent failed even as the federal government bailed out many of the nation's largest banks.

Since then, access to loans has shriveled even more, thanks to the “Great Recession” that stemmed from the banking industry crisis.

The Texas Credit Union League says commercial loans made at credit unions equate to only 1 percent of the commercial lending market. Making the changes the credit union industry wants in an upcoming jobs bill might lift the credit union market share to 2 percent, still leaving banks in almost total domination of the market.

Yet, banks will fight the change. Community and independent banks will squeak and squall. They will say they make loans to small businesses. It is their bread-and-butter business, they will say.

Small businesses say banks don't make enough of them. In the last few years, bank requirements for cash flow, collateral and other terms have risen. Banks avoid financing start-up companies, too."

Click here to read the rest of the story...

Shout back with your thoughts and ideas about credit unions and small business lending.

Comments

[Max Silver]

Thanks for sharing this video - it is definitely a powerful story! Great analysis of what the new bill would have to do to help CU's. Really broken down nicely!

[James Robert Lay]

Thanks so much for the comment Max and joining the conversation. Stories like these need to be shared.

[Credit card processing houston]

Bottom line until credit starts flowing more freely it will inhibit new businesses from starting and older ones from expanding.

[Blair Evan Ball]

Credit Unions deserve bigger role.

At what cost? The ramifications could be devastating to an industry who for the most part has kept their nose clean. The number of camel 3,4, & 5 Credit Unions continue to grow.

With more than 50% of the Credit Union's having assets of < $20 million how do they survive the stabilization fees and lower growth?

Major consolidation is on the way. While I agree that this would fill a need in the marketplace left by banks, maybe the bigger credit unions would be better served filling that void.