CHICAGO (7/25/12)--Credit unions nationwide are increasing their member business lending (MBL) to small businesses, while banks commercial lending has declined, according to a Reuters article Tuesday.
Eric McCarthy, a Phoenix entrepreneur, needed money to assemble an ice cream business, so he went to several banks, but none would help him.
"I tried all of the big banks, literally all of them, and was shocked and surprised that I got turned down," McCarthy, who bought four Baskin Robbins stores in his area this spring with a $300,000 loan from Mountain America CU in Salt Lake City, Utah, told Reuters." The big banks didn't want to lend a little money; they wanted to lend a lot of money."
From 2008 through 2011, credit union lending surged 22%, said the article citing statistics from the National Credit Union Administration (NCUA).
Meanwhile, commercial bank loans that are less than $1 million have dropped by more than 14%, compared with 2008 levels, according to data compiled by the Federal Deposit Insurance Corp.
However, MBLs constitute only 4% of the roughly $1 trillion total credit union assets nationwide. Many credit unions want provide more MBLs, Reuters pointed out.
The Credit Union National Association (CUNA) and credit unions are urging Congress to increase credit unions' MBL cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in business loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said.
Debbie Matz, NCUA chairman, told Reuters the cap is "arbitrary."
"Credit unions tend to make very small business loans," she added. "Generally banks don't even make a loan that small," she said, noting the average credit union business loan is about $230,000. "They're filling a very important need for small businesses."