stickyimage

More CU Loans to Small Biz? Banks Say No

Tags: , , , , , , ,

Senate Bill 509, or the Small Business Lending Enhancement Act, has been making headlines this week. Credit Unions tout it as a stimulus for the economy; commercial lenders and analysts disagree.

Senate Bill 509, or the Small Business Lending Enhancement Act, would address ongoing complaints about limited access to business loans by raising a cap on commercial loans that credit unions are permitted to make, based on a percentage of their assets. But, it has been sitting in the Senate Banking Committee since March 2011.

In theory, a noble gesture towards increasing credit unions’ lending capability, adding jobs and stimulating the economy. But, traditional bankers oppose the bill. Why? According to a report by the Capital Policy Analytics Group, because “claims made by credit union advocates regarding job creation and economic growth as a result of an increase in the business loan cap are highly questionable.”

Other analysts agree, saying the bill would have little impact on small business lending because most credit unions don’t even make business loans, and the vast majority of those that do currently lend nowhere near the cap. “Any additional commercial lending by credit unions – as a result of a new law, regulatory fiat, or otherwise,” he says, “Will result in a net loss of tax revenues to the federal government as taxes that would otherwise have been paid by commercial banks making those loans are not paid by tax-exempt credit unions. The most recent estimate by the Congressional Budget Office pegs the lost revenue at nearly $16 billion.”

What do you think? Let us know at our LinkedIn Page.

Read More

5 years ago by in . You can follow any responses to this entry through the | RSS feed. You can leave a response, or trackback from your own site.