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Survey Small biz short on funding suggests raising MBL cap
WASHINGTON (7/12/12)--A survey by a trade association for small businesses--which supports expanded business lending for credit unions--indicates that many small businesses are unable to locate funding sources. Among the solutions it suggests is increasing credit unions' member business lending (MBL) cap.

Further, the survey indicates that--when small businesses do go to a credit union--they like what they get, rather than what they receive from big banks.

Cash flow issues continue to plague a significant number of small businesses in the U.S., said the 2012 Small Business Access to Capital Survey from the National Small Business Association (NSBA).

The cash flow problems of small businesses have been "exacerbated in recent years," said NSBA in the report. Nearly half  (43%) of small-business respondents said that in the past four years, their loans or lines of credit were reduced. Nearly one in 10 had their loans or lines of credit called in early by their bank. Of those who experienced the early loan call-in, 19% were given fewer than 15 days.

"Given that the average balance on a loan or line of credit is $265,060, 15 days is a death sentence for most small business," said the report. "Adding insult to injury, 60% of those who reported changes in their loans or lines of credit stated that the reason was due to the bank's internal risk assessment, and 15% weren't even given a reason."

While 60% of small businesses responding to the survey did business with a large bank, only credit unions and small community banks received a majority overall positive rating by respondents, said NSBA.  Credit unions received a 60% positive rating; small banks, 73%, and large banks, 47%.

Small businesses' clients are taking longer to pay their bills--21% of businesses surveyed reported longer payment times with a notable jump in terms of net 60 to 90 days, said the report. Fifty-five percent of small subcontractors on federal projects reported late payments from a prime contractor.

NSBA offered two bright spots from the survey.  Nineteen percent of businesses surveyed said that with the recent passage of the JOBS Act, they are more likely to seek outside investors.

"Yet more must be done to improve finance options for small business," said the report, "from increasing the lending cap on credit unions to strengthening [Small Business Administration] lending programs to reforming the way the banking industry treats small-business loans."

NSBA is a member of a coalition that recently signed a letter put together by the Credit Union National Association (CUNA) to Congress urging passage of legislation to lift credit unions' MBL cap to 27.5% of assets from the current 12.25%. Lifting the cap would generate $13 billion in new small business loans and help create 140,000 jobs.

NSBA noted that its data from "as far back as 1993," indicate a "clear correlation to a small-business owner's ability to hire and his/her ability to get financing."
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