Credit unions—nonprofits that offer basic banking services want to double the amount they lend to small businesses. And they may get some help from the government.
Sen. Mark Udall, a Colorado Democrat, plans to file legislation early this week that would increase to 25% the amount of assets credit unions can lend to small businesses. Currently, small-business loans by credit unions are limited to 12.25% of assets per a 1998 federal law.
“We probably have to turn away anywhere from $1 million to $2 million small-business loans a month” as a result of the cap, said St. Mary’s CEO Ron Covey. Meanwhile, “a lot of the larger financial institutions that are looking for larger transactions…have pretty much pulled out of small-business lending.”
“It’s one of the few easy ways that we have to support credit unions, small businesses and help create jobs all at once,” Mr. Udall said in an email.
Traditional banks, however, have vowed to fight such a proposal. Last year, a cadre of lobbying groups led by the American Bankers Association helped kill a prior version of Mr. Udall’s legislation. They argued the bill would allow large, tax-advantaged credit unions to swipe market share from community banks, while distracting them from serving low-income individuals
Meanwhile, the Credit Union National Association, a trade group that supports the measure, said the bill could add 125,000 new small-business jobs by making it easier for entrepreneurs to obtain financing. About 21 million U.S. employees work in businesses with fewer than 20 employees, according to the Census Bureau.
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