Ala. CUs eye biz lending growth

September 1, 2015

BIRMINGHAM, Ala. (9/1/15)--A recent article in the Birmingham Business Journal discussed the interest by credit unions to ramp up member business lending. The article also pointed out that credit unions typically lend to small businesses, an area often ignored by big banks. 

Credit unions currently are constrained by a member business lending (MBL) cap of 12.25% of assets, a figure that greatly cuts into the loans credit unions could provide to their business members.

The Business Journal noted that credit union advocates are urging for the National Credit Union Administration to approve regulation that would ease constraints on lending. The recent NCUA proposal would eliminate restrictions not mandated by the Federal Credit Union Act, and would, in fact, make some of the changes credit unions have been requesting. 

The regulatory changes would act as a boost for small businesses in the state, and nationwide.

"The average credit union business loan is $250,000," Mike Bridges, vice president of communications for the League of Southeastern Credit Unions, told the Business Journal. "Credit unions are not out looking for multimillion-dollar business loans. These are focused loans for small businesses."

If the NCUA’s proposed rule is adopted, small businesses would have greater access to financing, Bridges said.

“Credit unions in Alabama would be able to lend more than $89 million in the first year, and that could create about 978 jobs,” Bridges said, adding, “Banks don’t want credit unions lending more, yet they aren’t lending to these businesses either.”

CUNA supports legislation that would increase the member business lending cap to 27.5% of assets. If the higher cap was enacted, in the first year credit unions could increase business lending by $16 billion, potentially producing 150,000 jobs nationwide.

Perhaps providing more evidence that the state’s economy would benefit from easing member-business lending restrictions on credit unions, other prominent state stakeholders would like to see the cap lifted as well, according to the Business Journal.

Tom Todt, director of the state’s small business administration office, said it would affect small business lending positively.

“In the Alabama District, we have had one or two credit unions that were extremely active in (small business) lending until they came up against their cap, at which point it virtually disappeared,” he said.