At 'Summit,' CUs Press For Expanded Business Lending

Register now

Credit union leaders continued their efforts last week to pry open the business loan market during a meeting with high-level Bush Administration officials and lawmakers at Credit Union House on Capitol Hill.

A top White House aide told credit union representatives at CUNA's CU Small Business Summit the Bush Administration sees credit unions as a valuable means of expanding access to credit for new and small business owners because of the closeness to the markets credit unions enjoy. That view was echoed by Rep. Don Manzullo (R-IL), the chairman of the House Small Business Committee, who committed to helping credit unions expand their role in business lending.

NCUA Chairman Dennis Dollar, who participated in the summit with the other two NCUA board members, told a representative of the U.S. Small Business Administration (SBA), that the credit union regulator supports NAFCU's and CUNA's efforts to expand credit unions' access to the SBA's 7a loan guarantee program, currently restricted to those credit unions with community-based fields of membership (FOM). NCUA's general counsel is working with the SBA on a legal interpretation that could broaden credit union participation in the program, currently limited to just 64 credit unions.

Gene Poitras, president of the CU Association of Oregon and chairman of CUNA's Small Business Committee, said several agency representatives explained the availability of loans and grants for credit unions that were little known about, including the Department of Housing and Urban Development (HUD) and Department of Energy, as well as the SBA. An SBA representative also explained that credit unions' addition of low-income communities into their FOMs made them eligible for participation in the SBA's 7a program, thereby expanding credit union eligibility by hundreds of credit unions

Programs offered by federal agencies are attractive for credit unions, noted Gary Base, a member of the committee and president of Plano, Texas-based Community CU, because of the federal guarantee, that reduces the risks of the loans, and because the guaranteed portion does not count against the congressional limit of 12.25% (of assets) on member business loans.

Grace Mayo, another committee member and president of Telesis Community CU, Chatsworth, Calif., noted that a business lending relationship with a member is multi-faceted and can grow to include numerous business needs, including payroll, retirement investments, and related products, like insurance. "There's a whole ancillary business out there," she said.

CUNA's chief lobbyist, John McKechnie, said the Summit succeeded in setting the stage for an expanded credit union role by introducing some of the federal agencies to credit unions.

Both Manzullo and Rep. Paul Kanjorski (R-PA), who attended the meeting, discussed potential ways that Congress may assist in expanding credit union's role in small business lending. But McKechnie acknowledged there is some opposition on Capitol Hill to credit union's expanding their business lending as evidenced by the MBL cap included in HR 1151, the 1998 CU Membership Access Act.

The CUNA committee, comprised of credit union business loan experts, has been working for the past year to expand credit union business lending, which has been stuck at less than 2% of credit union loan portfolios for several years. Only 15% of all credit unions, fewer than 1,500, offer member business loans.

The panel recently compiled and issued a "best practices" handbook on business lending. The panel is also working with the corporate network to explore a secondary market vehicle for credit unions to securitize business loans.

For reprint and licensing requests for this article, click here.