HIGHTSTOWN, N.J. (8/7/12)--Both credit unions and banks in New Jersey are seeing pent-up demand from businesses wanting to grow and needing business loans to do so, according to NJBiz.com (Aug. 6).
Financial institutions in the state said they are competing to lend money to businesses that weathered the economic slump and can leverage low interest rates to finance new equipment, buy facilities and hire more workers, said the article, which noted a "pent-up demand by businesses to seize opportunities to grow."
In the article, one bank said its commercial lending has increased the first six months of the year because businesses had held back so long on buying equipment, building or inventory that once they saw more positive economic signs with their businesses starting to grow, they began investing in their business by borrowing.
New Jersey Credit Union League President Paul Gentile told the publication that in the state, the average size of a credit union business loan is $171,000, and "a lot of banks don't want to touch loans that small…It's important to have credit unions making those smaller business loans and filling that niche."
The article also noted the movement advocating legislation to enable credit unions to provide more member business loans (MBL).
The Credit Union National Association, credit unions, and state leagues and associations are advocating passage of a bill in Congress to enable credit unions to provide more MBLs to fulfill the gap in credit opportunities. They seek to raise the MBL cap to 27.5% of assets, from the current 12.25% so they can offer more loans. Raising the cap would generate roughly $13 billion in new small business loans into the economy, helping creating 140,000 new jobs--just the first year. And that would be at no cost to the taxpayer.
The article also reported comments from management at three credit unions.
Marc Sovelove, senior vice president of Financial Resources FCU, Bridgewater, said his credit union expects to hit the cap within 18 months.
Alan Feigenbaum, president of Advanced Financial FCU, New Providence, said his credit union is already at its cap and can't market its business loans. If it weren't for the cap, the credit union would "certainly add at least another $2 million in commercial loans, maybe more, and fairly quickly," he added.
Bob Birkhahn, senior vice president of commercial lending at Affinity FCU, Basking Ridge, noted that businesses need capital, and while some are slow to expand, they need funds to run their day-to-day operations.
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