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CU System
MBL cap forces down CU small-biz lending Biz2Credit
NEW YORK (8/10/12)--Small-business lending approvals in July by credit unions nationwide stood at 54.6%, revealed the Biz2Credit Small Business Lending Index, a monthly analysis of 1,000 loan applications on Biz2credit.com.  

The July loan approval rate of credit unions dipped from 55.8% in June. The figure represents the lowest approval rate for credit unions since August 2011, when the figure stood at 54.2%. Some credit unions have reported that they had reached their lending limit, which currently is 12.25% of total assets, said Biz2Credit (PRWeb Aug. 9).

The slowdown is due, in part, because some credit unions reportedly "capped out" on the member business lending (MBL) limit, while others are being more cautious in their lending because of Small Business Administration rules, the analysis says. The Credit Union Small Business Jobs Bill proposed by U.S. Sen. Mark Udall (D-Colo.) seeks to raise the credit union MBL cap to 27.5% of total assets from the current figure of 12.25%, the study said.

The Credit Union National Association (CUNA) and credit unions say that increasing credit unions' MBL cap 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.

Approvals in July by big banks ($10 billion-plus in assets) improved for the second consecutive month to 11.3% from 11.1% in June, an indication that demand for business lending is continuing.

Conversely, small-bank lending dropped slightly to 47.4% in July from 47.5% in June. This figure however is still up two and a half percentage points from 44.9% in July 2011.

Alternative lenders--accounts receivable financers, merchant cash advance lenders, Community Development Financial Institutions (CDFI), micro lenders, and others--are increasing their lending. In July, alternative lenders approved 64.1% of loan requests, up from 62.9% in June and nearly 12 percentage points higher than a year ago. The 64.1% approval rate was the highest figure since the Biz2Credit Small Business Lending Index began in 2011.

To compile the monthly index, Biz2Credit analyzed loan requests ranging from $25,000 to $3 million from companies in business more than two years with an average credit score above 680. The data are from more than 1,000 small business owners who applied for funding on Biz2Credit's online lending platform.


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