NEW YORK (8/17/11)--The number of small businesses that haven't applied for loans increased during the past three months to 67% from 41% in the first quarter of 2010, according to the Small Business Borrowers Poll released last week by the Federal Reserve Bank of New York. The main reason was pessimism: 27% of those surveyed who didn't apply for a loan said they feared being turned down, and 19% said they are trying to pay off their own debt first (CrainsNewYork.com Aug. 15). Overall there was a 10% decline in small business lending in the region, compared to last year. Lending criteria has become more difficult for small businesses, the Staten Island Chamber of Commerce told the publication. The Credit Union National Association (CUNA) and the nation's credit unions see the trend as another reason why Congress should raise credit unions' member business lending (MBL) cap so they can help the economy and its backbone, small businesses, generate more jobs. CUNA and credit unions are urging Congress to raise the cap to 27.5% of assets from 12.25%. Doing so would generate 140,000 new jobs and inject $13 billion in funds for small business loans. The Small Business Lending Enhancement Act of 2011 (H.R. 1418, S.509) is making its way through Congress with a provision to lift the cap. The bill was introduced March 8 by Sen. Mark Udall (D-Colo.). It has 20 co-sponsors in the Senate. In the House, H.R. 1418, which was introduced on April 7 by Rep. Ed Royce (R-Calif.), has 61 co-sponsors. On May 2, it was referred to the House Financial Services Committee's subcommittee on financial institutions and consumer credit. Some credit unions are bumping up against the cap, which means they are restricted in their small business lending and must turn away loan applicants. The New York Fed study also found that more businesses now rely on earnings and on personal and family wealth for financing. Those who applied for credit or who had sufficient funding used lines of credit more, while borrowers who were discouraged and those who are paying off debt relied on credit cards. The New York City Department of Small Business Services noted it is connecting businesses to more than 40 credit unions, banks and alternative lenders, and engaging financial institutions to create innovative partnerships that focus on increasing referrals and enhancing educational resources related to securing financing. The poll surveyed 876 small businesses in New York, northern New Jersey and Fairfield County, Conn.