Serving Small Biz Important to Latino CUs
CUs are a key source of business loans for Hispanic small businesses.
Sixty percent of the general business market is not getting needed loans, and for Hispanic businesses, that number nearly doubles.
Credit unions are a key source of business loans for Hispanic small businesses in a time where 61% of small businesses are facing worse credit accessibility than a few years ago.
That’s according to Jesse Salazar (pictured above left), vice president of government relations and policy at the U.S. Hispanic Chamber of Commerce, who, along with Ruben Garcia, district director of the U.S. Small Business Administration (SBA) in San Diego, spoke Sunday at a small business lending breakout during the Network of Latino Credit Unions & Professionals 7th Annual Latino Credit Union Conference.
Salazar noted that small business lending is shrinking, citing Federal Deposit Insurance Corp. statistics that indicated the total loans outstanding are down 15% since June 2008. “Less and less, the banks giving out loans are unable to meet the needs of small businesses.”
“Credit unions are really an important source of lending, and they are making a big push to enhance their small business lending so they can do more,” he continued, noting the bills they are pushing in Congress that would raise credit unions’ member business lending cap to 27.5% of assets from 12.25%.
“We have been supporting that in the past and likely will in the future,” Salazar told the group.
He said poor people turn to payday loans because they can’t get access to credit, and that small-bank lending approvals fell 50% in 2011. Of the decrease in overall bank loans, he said, “we haven’t seen any indication that they'll expand their SBA loans. Bank of America is severing its small business credit lines” because the loans aren’t the most profitable thing.
Small business lending is “capital-intensive and risky. If banks aren't lending, there’s very little confidence that small business can turn the economy. That’s troubling, and another reason to increase credit unions’ small business loans,” he said.
SBA’s Garcia noted that in the past credit unions have not been very involved with SBA lending. But getting credit unions involved and making Hispanics aware that credit unions engage in small business lending means “credit unions can offer something no one else is offering.”
Garcia told of his father, a cotton picker turned gas station entrepreneur, who in the late 1950s could not get a loan to put a car wash and a hot dog stand on the station’s premises, because he had no collateral. The banker told his father that he wouldn’t be able to get a loan anywhere, even though an SBA office, which would have loaned his father $10,000, was six miles away. Discouraged, his father sold the station “and gave away his dream.”
Garcia said that in his position with SBA, “I never want to see what happened to my father happen to anyone else. SBA is an answer,” he said, noting 66.7% of businesses in the U.S. are small businesses. “Take away small businesses, you take away the lifeblood of the economy.”
“The future is the Hispanic community--one of the fastest-growing communities in the nation. It will determine the country’s future--politically and economically,” Garcia said.
Credit unions will need to learn that Hispanic families turn to a “trusted adviser”--someone with influence in their community--when seeking advice. “It’s not the shiny ads with the beautiful Hispanic family” that influence Hispanics’ financial decisions, “it’s the trusted adviser,” Garcia said.
He outlined resources from SBA that can educate Hispanic small businesses, including Small Business Resource magazine, available on SBA’s website at sba.gov.
The conference, which began Friday and ended Sunday, was held in conjunction with America’s Credit Union Conference presented by CUNA in San Diego.