Small Business Lending

There are 26 million small businesses in America today. These businesses create the majority of our nation's new jobs. Unfortunately, the current credit crunch is making it increasingly difficult for America’s small businesses to obtain credit.


Credit unions want to be of greater help during the country's current credit crunch and stand ready to support small businesses with more capital. In order to do so, Congress needs to remove the arbitrary barriers that severely restrict the ability of credit unions to provide loans to small businesses, namely the statutory lending limits imposed by Congress in 1998 and the burdens associated with many of the Small Business Administration (SBA) lending programs.

Current credit union member business lending (MBL) activity includes:

  • Credit union MBLs are relatively small loans; at the end of 2007, the average credit union MBL originated was $193,394;
  • Nationally, credit union business lending represents less than one percent of the depository institution business lending market; credit unions have about $28 billion in outstanding business loans, compared to $3.1 trillion for banking institutions; and
  • In general, credit unions do not finance skyscrapers or sports arenas; they make loans to credit union members who own and operate small businesses.

Under current law, credit unions are restricted from member business lending in excess of 12.25 percent of their total assets. This cap has no basis in either actual credit union business lending or safety and soundness considerations. In fact, a subsequent report by the U.S. Treasury Department found that business lending credit unions were more regulated than other financial institutions, and that delinquencies and charge-offs for credit union business loans were "much lower" than that for either banks or thrift institutions.

The current cap severely restricts the ability of credit unions to provide loans to small businesses at a time when small businesses are finding it increasingly difficult to obtain credit from other types of financial institutions, especially larger banks.

CUNA is asking Congress to support legislation with provisions that would restore more MBL authority for credit unions, including:

  • The Credit Union Regulatory Improvements Act (H.R. 1537), which would increase the current MBL limit from 12.25 percent to 20 percent of total assets, and permit the National Credit Union Administration to increase the threshold for defining a MBL from $50,000 to $100,000;
  • The Credit Union Regulatory Relief Act (H.R. 5519), which contains several provisions that would permit credit unions to make more small business loans available, although it does not address the overall cap; and
  • The Credit Union Small Business Lending Act (H.R. 1849), which recognizes the need to enhance credit union business lending through SBA programs.

CUNA strongly supports SBA's 7(a) loan program, which provides America's 26 million small business owners with the capital and technical assistance needed to start and expand their businesses. Several important factors, including the statutory MBL cap and SBA policies that, until 2003, limited credit union eligibility to participate in the 7(a) program, have discouraged many credit unions from participating.

The message is clear: Many small businesses are struggling with high-cost, inaccessible service from for-profit firms. Credit unions' not-for-profit, member-focused services are exactly what these businesses need.

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