Member Business Lending

In today’s economic climate, it’s good to know that credit unions continue to lend to members, in particular, their small business members. Consider these facts:

• The number one SBA lender in Texas is a credit union.
• Credit unions small business lending is up 18%.
• MBL reform could provide up to $10 billion to small businesses in the first year alone and create over 108,000 new jobs.
• About 70 percent of all credit union business loans fall into what the SBA considers “micro-loans” under $100,000, according to the Competitive Enterprise Institute.

The best kept secret is out and businesses are beginning to realize they DO have an option. Except that Congress limited that option a dozen years ago, around the time that national Wall Street banks began to grow astronomically.  When credit was easy to get, Congress elected to place a cap on the amount of lending that any credit union could do for small business.

It was a decision that didn’t make sense then and makes even less sense now.

If Congress were to restore credit union’s ability to lend, it would put an estimated $10 billion into our economy, directly in the hands of small business. Tax and bail out free.

Credit unions have hundreds of success stories on their business lending books. Small businesses who were of no interest to banks because their needs – or their assets – were too small.

One Small Business’ story

Turned down by 15 banks, one family turns to a credit union to make their business dream come true.
Grammies Day Care: Meet the Frescas family. Graciela Frescas operated a home day care for years. Her husband, Joe, was injured in a locomotive explosion, and had to shut down his business side business. Soon after, the family (including their son Nick and daughter Divina,) had an idea. Graciela had built a great reputation with her home day care, and had a waiting list of people interested and was constantly turning people away. What if they worked together and opened a real day care center? They put a business plan together and set out to look for financing.
They were turned down by 15 separate banks, including community banks. “We didn’t have money to do start the business, but we had a great idea,” Joe Frescas said. “The banks only wanted to lend to us if we already had money.” Then the SBA recommended they try a Credit Union.

Not only did the credit union give them their loan, they helped them make it work. “At the credit union, they believed in us,” said Joe Frescas.  “They knew we could do it.” Years later the family is opening a second facility that is twice the size of the first one with a list of nearly 100 children ready to enroll before they even open.  They employ 30 people, take care of hundreds of children and are talking about a third facility.

Ask your congressman and your senator to put credit unions to work. Not every one does business loans, but the ones who do can help our economy recover.
Link to: http://capwiz.com/cuna/home/

FAQs on Credit Union Small Business Loans

Q: What are Member Business Loans (MBLs) and who is eligible?

A: Member Business Loans (MBLs) are business loans available to credit union members who own their own businesses. 

Credit unions in Texas and across the United States have been making  these MBLs since the early 1900s, though the number of credit unions that offer MBLs is limited, given the complex regulatory requirements associated with a business lending program. 

Q: Why are MBLs capped?

A: For over 60 years credit unions faced no limits on the number or amount of member business loans (MBLs) they could make. That changed in 1998, when Congress passed the Credit Union Membership Access Act.  Among numerous items in this bill, Congress imposed for the first time arbitrary limits on MBLs, effectively capping total MBL lending to 12.25 percent of a credit union’s total assets. 

As a comparison, business loans comprise more than 58 percent of the lending portfolio of Texas-based banks, which face no government-imposed cap.

Q: What has been the effect of the MBL cap?

A: The cap on MBLs has restricted the capital available to business owners, particularly those who own smaller companies.  This effect has occurred for two reasons:

A growing number of the credit unions that offer MBLs are hitting the cap, forcing them to turn away credit-worthy small business owners who seek loans to expand their companies.  This problem is especially acute in small or niche communities where credit unions tend to be smaller and other funding options are limited.

Small business owners are caught in a credit crunch and a world of shrinking options – while credit unions have money to lend.  Banks, who continue to receive  massive capital infusion from taxpayers, are still not lending to small businesses.

Q: If MBL reform is so beneficial, why is anyone opposed?

Contact Us

Do you have a small business loan with your credit union? Contact us and tell us your story!

To contact us directly, call or email Winter D. Prosapio, Public Affairs Director for the Texas Credit Union League at (800)442.5762, ext 8513 or wprosapio@tcul.coop.