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Credit Unions Lobby to Increase Small Business Lending

In response to an increased demand for small loans, credit unions are rallying to increase their lending bandwidth.

Frustrated with big banks, more and more entrepreneurs have turned to local credit unions for small loans to support their businesses.

To support this growing demand for funds, credit unions are lobbying to change an old law that caps the amount they are able to loan, according to Reuters.

The cap, which went into effect in 1998, says that credit unions can't lend more than 12.25% of their assets. But since that time, lending at credit unions has increased— especially loans to small businesses. The National Credit Union Administration reports that there was a 22% jump in credit union lending between 2008 and 2011.

"Credit unions tend to make very small business loans. Generally banks don't even make a loan that small," Debbie Matz, chairman of the National Credit Union Administration, told Reuters. The average credit union loan for a business is around $230,000.  

So credit unions are reportedly aiming to raise that asset cap to 27.5% via legislation introduced to Congress earlier this spring.

The move has been stalled by the banking industry, which argues that credit unions would then have unfair competitive advantages, such as a tax-free status. 

IMAGE: iStock
Last updated: Jul 25, 2012


Caitlin Berens writes about business innovation and entrepreneurs. Before Inc., she worked at Billboard, SELF, and Better Homes and Gardens. She attended Drake University, and lives in Brooklyn, New York.

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