Credit unions have opportunity with business lending

A new study finds that business lending is a good opportunity for credit unions and could be beneficial to local communities. That’s what the Filene Research Institute study, which was funded by CUNA Mutual Group, found. The timing of the study titled, “Room to Grow: Credit Union Business Lending,” is important because the NCUA is […]

Filene logoA new study finds that business lending is a good opportunity for credit unions and could be beneficial to local communities. That’s what the Filene Research Institute study, which was funded by CUNA Mutual Group, found.

The timing of the study titled, “Room to Grow: Credit Union Business Lending,” is important because the NCUA is accepting comments on proposed member business lending rule modifications. The business loan market offers credit unions opportunities for growth and to provide economic support for their communities, according to the study authored by David A. Walker, Ph.D., who is the John A. Largay Professor at the McDonough School of Business, Georgetown University.

Credit unions that are active business lenders are expanding this asset more rapidly than other assets and, in many counties, filling gaps left by banks. According to the study, the commercial banking industry is becoming more concentrated and focusing more on real estate lending and less on commercial and industrial lending. Over the past 35 years, the percentage of bank loans to business has declined from 35 percent to 21 percent, while banks’ real estate lending has increased from 28 percent to 52 percent of total loans.

“An important policy question is whether credit unions should be limited to 12.25 percent of their assets in business lending,” said George Hofheimer, chief knowledge officer at the Filene Research Institute. “This study shows clearly that many credit unions can fill a business lending gap in their communities.”

The study focused on 120 credit unions located across 39 states and 96 counties. Credit unions in the study were all approaching the regulatory cap for business lending. “Credit union business lending is primarily to small businesses, and it is well established that small firms are the engines of economic growth for many aspects of the U.S. economy,” the report states. “Increasing the percentage of total assets that credit unions may lend to business should be beneficial to local communities.”

The findings indicate a need for small businesses to gain greater access to credit, and credit unions have an opportunity to fill the void being left by commercial banks, which will potentially provide economic benefits, Roe added. “We plan to submit the report to the NCUA with our public comment letter advocating the agency’s proposed member business lending rule changes.”

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The League of Southeastern Credit Unions & Affiliates represents 342 credit unions in Alabama, Florida and Georgia, with a combined total of $118.63 billion in assets and more than 10.1 million members. LSCU & Affiliates provides legislative and regulatory advocacy; education and training; cooperative initiatives (including financial education outreach); public messaging; information services; and business solutions.

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