Small Businesses Find A New Source For Funding
Unable to get loans at banks, more small-business owners are turning to credit unions.
Most credit unions didn’t get in on the subprime-loan market, so they’re not smarting from multibillion-dollar losses like many banks. Many also have extra cash because deposits increased in 2008 as more investors abandoned the stock market and sought greater certainty in savings accounts. So credit unions are more able — and willing — than most of their banking counterparts to dole out money to small businesses.
Wisconsin Credit Union LeagueMatt Rosenthal, vice president of business services of Summit Credit Union, right, with Josh Duggan, president of Chem-Dry of Madison. Mr. Duggan received two business loans from Summit Credit Union.
About 27% of the 8,147 credit unions in the U.S. offer business loans, according to the Credit Union National Association, a trade group based in Washington, D.C. The amount of business loans was up 18% last year to almost $33 billion from nearly $28 billion in 2007. The average loan size is about $215,000.
“In this really bad environment, we’re doing more and more loans,” says Mike Schenk, senior economist at the Credit Union National Association.
Many credit unions say they would lend out even more money if they could. But a 1998 federal law caps the amount of business loans credit unions can have at 12.25% of assets. The banking industry opposes any changes to the legislation, but credit unions hope to convince Congress to introduce legislation to lift the cap. Last year, a bill was introduced to raise the lid to 20%, but it didn’t garner enough votes. Full post.
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