PHILADELPHIA (6/17/09)--Credit unions are making gains in small business lending while banks are tightening underwriting standards and making less such loans, according to Cascade (Spring/Summer 2009), a publication of the Federal Reserve Bank of Philadelphia. Because of recent bank consolidation, the small business market “has been largely underserved,” Molly Snody, director of business advisory services for the Pennsylvania Credit Union Association, told the publication. In 2009, business owners who are credit union members have been looking to credit unions for financing at a steadily rising rate, she added. To begin lending to businesses, credit unions can either develop staff with specialized skills or else outsource underwriting, servicing and other small-business lending functions, Snody told Cascade. “We tell credit unions that it’s in their best interest to train their staffs or hire experienced personnel, since the credit unions are responsible for the lending decisions,” Snody said. Larger credit unions are more inclined to make business loans, Mike Schenk, senior economist for the Credit Union National Association, told the publication. More than half (53%) of the 3,500 credit unions with an asset size in excess of $20 million reported outstanding business loans at the end of last year. Of the 4,500 smaller U.S. credit unions, only 7% reported outstanding business loans at year-end, Schenk said. Banks held 98.94% of outstanding business loan dollars at the end of 2008, Schenk added. The business community’s limited awareness of the availability of credit unions’ services and loans is a barrier to the growth of credit union business lending, Kathie A. Stone, CEO of East Coast Business Lenders, told Cascade.