WASHINGTON (12/20/11)--An American University Investigative Reporting Workshop analysis of recent Federal Deposit Insurance Corp. (FDIC) data has found that loans to small businesses are at a 10-year low, and even successful small businesses are having issues accessing credit. However, but Credit Union National Association (CUNA) President/CEO Bill Cheney reminds that allowing credit unions to make more loans to their small business members would ease this credit crunch and help the economy.
The FDIC statistics showed that banks reported 1.5 million outstanding loans of $1 million or less to small businesses as of Sept. 30, and the amount of these types of loans has fallen consistently since 2008.
The American University analysis found that the volume of loans made to small businesses has fallen 14.7% from the peak amount, while overall commercial and industrial lending by banks has increased for the past five quarters. The reduction in credit "has had an even bigger impact" on small businesses, and, the report notes, "the sheer length of the country's economic woes has left small businesses with fewer reserves and hardly ready to jump back up, were conditions to start looking up."
"As we have been saying for some time: Small business owners are not finding the support they need from banks, and this latest analysis gives additional weight to our view," Cheney said.
"Small business-owning credit union members want to create jobs. To do that, they need a financial partner who will stand with them and help their business succeed with credit when they need it and support for their payrolls and other aspects of their operations," Cheney said. "Credit unions have been that partner for many of their members, but it will become increasingly difficult in the future for credit unions to continue that role, unless Congress gives credit unions more authority to make member business loans (MBLs)," he added.
CUNA estimates that increasing the current 12.25% of assets MBL cap to 27.5% of a credit union's total assets would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer.
Credit unions have been picking up some of the small loan slack, as a recent Biz2Credit Small Business Lending Index report showed that credit unions granted 57% of the small lending requests brought by their members in November. Big banks approved 10% of their small business loan requests, by comparision. (See related Dec. 19 story: Biz lending up, CUs outshine big, small banks)