Washington, D.C. – Today, U.S. Kirsten Gillibrand and a bipartisan group of her colleagues introduced a bill to spur small business growth and create jobs by increasing access to loans from credit unions. The Small Business Lending Enhancement Act of 2009 was co-sponsored by Senators Charles Schumer (D-NY), Joseph Lieberman (I-CT), Olympia Snowe (R-ME), Barbara Boxer (D-CA), Susan Collins (R-ME), and Mark Udall (D-CO).
The bill is in response to pleas the Senators have heard from small business owners in their states. In the past 15 years, small businesses generated nearly two-thirds of all new jobs created in the United States – yet during the economic crisis, small business owners have struggled to access credit they need to expand. This is in part because big banks have tightened their lending and partly because of a lack of access to loans from credit unions.
The Senators’ legislation is designed to increase access to credit union loans. By law, credit unions are required to limit member business lending to 12.25 percent of the credit union’s total assets. The Senators’ bill would raise that cap to 25 percent of total assets, and increase the minimum business loan subject to the cap from $50,000 to $250,000.
“If we’re going to create new jobs and rebuild our economy for the long term, small businesses need more access to credit,” Senator Gillibrand said. “This common-sense legislation would free up lending at not-for-profit credit unions in every corner of America to small businesses. This would give small businesses more of the capital they need to get off the ground, grow and get hundreds of thousands of Americans back to work.”
According to the Credit Union National Association, these sensible reforms will increase small business lending by $10 billion within the first year of their enactment, producing more than 100,000 new jobs.
Furthermore, the National Credit Union Administration (NCUA), the independent federal regulator with oversight of credit unions, supports this legislation. In a letter to the Treasury Department, NCUA Chairman Debbie Matz wrote, “NCUA supports a proper balance of serving business lending needs with a prudent regulatory framework to protect safety of the institutions and the National Credit Union Share Insurance Fund…. Credit union member business loans total over $27 billion in assets. The potential is much greater – both for credit unions and for small businesses.”
The legislation would also encourage more credit unions to extend credit to small businesses. Under the current law, many credit unions find it difficult to start member business lending programs because the cost of meeting high regulatory and staffing requirements is too expensive relative to the cap. Credit unions say that raising the amount they are able to lend would make it easier to recover costs, and therefore would increase the number of credit unions able to start small business loan programs.