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News Now

CU System
Small Biz Lending Index Some CUs hit MBL cap
NEW YORK (7/11/12)--Small business lending is on the uptake at financial institutions, and credit unions continue to lead banks in business loans approved, according to the Biz2Credit Small Business Lending Index for June.

However, credit unions are hitting against their member business lending (MBL) cap, said the monthly analysis of 1,000 loan applications on Biz2credit.com. Credit unions' approval rates of business loans was 55.8% during June, compared with big banks' 11.1% and small banks' 47.5%.

The June figures are slightly lower for credit unions and alternative lenders, and slightly higher for big banks and small banks than in May. In May, credit unions accounted for 57.6% approval rate, while small banks saw 45.5% and big banks saw 10.2%.

"Some credit unions have reported they had reached their yearly lending limit, which currently is 12.25%," said Biz2Credit's press release. "Sen. Mark Udall (D-Colo.) has introduced the Credit Union Small Business Jobs Bill (S. 2231) that would raise the credit union business lending cap to 27.5% of total assets," it continued. "By raising the cap, credit unions would be able to increase the number of small business loans."

The figures indicate that "small businesses remain much more likely to be approved at a credit union than at any other lender," said Mike Schenk, Credit Union National Association (CUNA) vice president of economics and statistics. He noted that "many small businesses continue to tell researchers that access to credit is problematic.  Many hundreds of credit unions are currently constrained in their lending by the existence of the artificial--and arbitrary--cap," he told News Now.

The June 2012 figures are higher than year-ago figures for all financial institutions and alternative lenders. In June 2011, credit unions led financial institutions' business lending, approving 52.3% of business loan applications while small banks approved 42.5% and big banks approved 8.9%. Alternative lenders approved 54.9%, compared with this June's 62.9%, which dropped from May's 63.2%.  The study noted that businesses turn to alternative lenders when banks stop lending. With a slight uptick in bank lending, the alternative lenders are seeing less business.

CUNA and credit unions are urging Congress to raise credit unions' MBL cap to 27.5% of  assets. Doing so would mean credit unions could invest $13 billion in new small-business loans to continue helping the economic recovery. Raising the cap would also generate about 140,000 new jobs the first year, without costing taxpayers a dime.

Biz2Credit analyzed loan requests ranging from $25,000 to $3 million from companies in business for more than two years with an average credit score above 680.


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