Small-biz loan cap looms for some N.C. CUs

January 16, 2015

CHARLOTTE, N.C. (1/20/15)--Credit unions nationwide have seen member business lending growth climb in recent years, and that trend has pushed a number of them close to the 12.25% limit of total assets the Credit Union Membership Access Act won't allow them to overstep.

In line with the view of the Credit Union National Association, which has led efforts to urge lawmakers to raise the MBL cap, a number of credit unions in North Carolina edging closer to the cap would like to see a change. CUNA backs legislation that would raise the cap to 27.5% of total assets.

"We are going to hit the cap," Marc Schaefer, president/CEO, Truliant FCU, Winston Salem, with $1.7 billion in assets, told the Charlotte Business Journal (Jan. 16). "It could take us two more years."

At $1.7 billion in assets, Truliant faces a business lending cap of  $216 million. Truliant currently has a portfolio of $146 million in small business loans, according to the Charlotte Business Journal.

Nationally, business loans continue to consume more of overall credit union loan portfolios as well. At the end of 2013, business loans comprised 7.25% of all credit union loans. Through the first nine months of 2014 they made up 7.36%, according to numbers from CUNA.

"You can't add talent or resources beyond what that cap is," Schaefer said. "It's a concern for us because as the businesses we work with become successful, we might not be able to help them. The cap does inhibit building that business."

Rob Thomas, vice president of commercial banking for Allegacy FCU, Winston Salem, with $1.1 billion in assets, told the Business Journal that it's important for credit unions to be competitive in the market because big banks continue to cannibalize community banks, stripping communities of the relationship banking for which business are often looking.

"You don't have much relationship banking out there, and that's the business credit unions are in," Thomas said.

The cap also can keep credit unions out of the marketplace entirely, the Business Journal found, as it reported that Sharonview FCU, Fort Mill, S.C., with $1 billion in assets, and Founders FCU, Lancaster, S.C., with $1.7 billion in assets, have decided not to offer business loans.

Schaefer hopes the issue will again be brought to Congress to provide relief to credit unions looking to expand in the market, but can't under the current lending limit.

And it may not only be the credit union movement whose voice will be heard.

"Ultimately, small businesses will go to Congress to ask why they can't do business in their community," Schaefer told the Business Journal. "There should be a limit, but right now it's too low."

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