Ask a bank for money to expand your restaurant business and you learn its loan officers seem trained to look for reasons to say “no.” Make that same request at a credit union and you get the feeling its loan officers look for a reason to say “yes.” Which is why you should hope that the U.S. Congress passes a bill that would raise the cap on credit union small business lending.
Right now, there are few restrictions on how much business lending banks can do. But credit unions can only loan out 12.25 percent of their assets to business customers. The Small Business Lending Enhancement Act (S. 2231) now before the Senate would raise that cap to 27.5 percent of assets, immediately creating a pool of $13 billion that could be used for small business loans.
The bill’s sponsor is Sen. Mark Udall, D-Colo. S. 2231 is identical to S. 509: Small Business Lending Enhancement Act of 2011, introduced last year. In the House of Representatives, the bill is known as H.R. 1418: Small Business Lending Enhancement Act of 2011, sponsored by Rep. Edward Royce, R-CA.
Such bipartisan support would typically mean this legislation would fly through Congress. But the banks are trying to kill this one. The American Bankers’ Association says it creates unfair competition because credit unions don’t have to pay federal taxes (as banks and bank shareholders do) nor adhere to the same regulations as banks. ABA lobbyists are working vigorously to make sure this bill never sees the light of day.
The National Association of Federal Credit Unions has lobbyists, too, and they’re working overtime to make sure S. 2231 passes. The NAFCU is also whipping up popular support, saying the current arbitrary cap on small business lending stifles entrepreneurial creativity and is a major drag on job creation. Both are strong arguments to make in the current political and economic climate.
Passage of this bill would mean credit unions that have plenty of money to lend to small businesses like restaurants could start taking loan applications and cutting some checks. If you’re a restaurant operator who’s been turned down by a bank, as a large percentage of restaurant operators reading this probably have been, cross your fingers this bill becomes lawpronto.