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Small CUs hitting MBL ceiling CU tells Mass. paper
MARLBORO, Mass. (5/4/10)--In Massachusetts, another credit union has saved the day for a small business turned down for a loan by a large commercial bank. But some smaller credit unions are near their member business lending (MBL) ceiling mandated by Congress. Joe Shaker wanted to buy the land he leased for his Mazda auto dealership. But after foot-dragging and "a large disconnect," his bank turned him down, he told a Massachusetts newspaper, Telegram.com (May 2). His lawyer suggested St. Mary's CU in Marlboro, which loaned him the funds to purchase 1.2 acres. The article notes banks have pulled away from business loans and that credit unions are trying to get the cap on MBLs lifted to 25% of assets from the current cap of 12.25%. It cites the Credit Union National Association's statistics that indicate lifting the MBL cap would result in $10 billion in additional loans and 100,000 jobs created. "When credit unions get near that cap, they have to stop lending or put a cap on it," said Daniel Egan, president of the Massachusetts Credit Union League as well as the New Hampshire and Rhode Island leagues. "Given this environment, where so many small businesses need credit, many small businesses are losing their current credit lines or having the notes called by the bank," Egan told the Telegram. The cap is an "arbitrary number," Egan said. "In the economic reality of the day, that cap is inhibiting credit unions from making business loans." He said that in Massachusetts, lifting the cap would mean $490 million more would be accessible for small business loans. The article also quotes John R. Caulfield, president/CEO of St. Mary's CU, which has $3.6 million in its loan portfolio and is not near the cap. Stephen Mackowitz, Digital FCU vice president of commercial lending, said his credit union isn't near its MBL cap, and he's seen "some, but not many" business owners who were turned away by banks. While Digital is a big institution, "a lot of small credit unions are bumping against their cap," he told the newspaper. "They are servicing their small business customers. It would be a shame to have to stop lending." For the full article, use the resource link.
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