Caps stifle credit unions’ business-lending ability

In his State of the Union speech, President Barack Obama outlined a proposal to energize small-business lending by providing $30 billion to community banks.

While well-intended, this proposal seems to overlook an easier and more taxpayer-friendly solution to helping small businesses: raising the arbitrary member business lending cap on credit unions.

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In fact, there are already two bills in Congress that call for the easing of this cap —  H.R. 3380, the Promoting Lending to America’s Small Businesses Act, and S. 2919, the Small Business Lending Enhancement Act of 2009. It would seem to be a natural extension of President Obama’s desire to help small business and create jobs to include either of these measures as part of legislation to promote employment and stimulate the economy. The president has stated that he would like a job creation bill passed that doesn’t burden taxpayers. 

This vital piece of legislation would raise the member business lending cap while also allowing credit unions to supply much needed capital to small businesses, all without costing the American taxpayer a cent. 

At the National Association of Federal Credit Unions (NAFCU), we recognize that the strength of our nation’s economy and labor force is inextricably tied to the health and well-being of small business.

By raising the arbitrary 12.25 percent member business lending cap on credit unions to the proposed 25 percent of assets, President Obama does not have to allocate any new funds but rather simply allow credit unions to lend more to small businesses.  Lifting this arbitrary cap would provide more capital for small business and promote job creation.     

Credit unions’ commitment to small business is demonstrated by continued growth in business lending. Since September 2008, credit union member business loans have increased nearly 17 percent. Through the third quarter of 2009, credit unions provided over 139,000 loans for a total of nearly $28 billion to their members.

In this time of turmoil, many small businesses have lost important lines of credit from other lenders. Unfortunately, due to the antiquated arbitrary cap, credit unions’ business lending ability is restricted.  While there are a number of credit unions at or approaching the arbitrary cap, many more have capital to lend but have not fully developed their business lending programs because of this artificial and arbitrary limitation on these programs.

Ultimately, lifting the member business lending cap on credit unions, through either S. 2919 or H.R. 3380, represents a win-win for small business, our nation’s economy and the taxpayers. NAFCU strongly supports including either of these two measures in any job creation legislation. We believe lifting this arbitrary member business lending cap represents the catalyst that can revitalize and invigorate small business in our country and put our nation on the road to prosperity again.

Arlington, Va.