Udall introducing bill to raise credit union lending caps | SummitDaily.com

Udall introducing bill to raise credit union lending caps

Sen. Mark Udall is reintroducing a bill that would increase credit unions’ ability to lend to small businesses, a move he says will help small businesses expand and create jobs. Currently, credit unions are required to limit small business lending to no more than 12.25 percent of their total assets. The Small Business Lending Enhancement Act would more than double that cap, raising it to 27.5 percent of a credit union’s total assets.

The Credit Union National Association estimates Udall’s bill will increase small business lending by $10 billion in the first year – including an increase of nearly $200 million in Colorado – and will produce more than 100,000 new jobs nationwide.

“The solution is elegantly simple: if there are credit unions with capital to lend, and small businesses in their communities that need loans to spur job growth – why not allow our economy to grow?” Udall stated in a press release. “My bill would free up capital – without costing taxpayers a dime – so that credit unions can loan to small businesses that need to make payroll, buy inventory or expand their businesses. It is a smart step toward shaping a business environment where entrepreneurship is nurtured, not choked.”

Kurt Schmidt, CEO of Credit Union of the Rockies, said the new bill would be especially good for businesses because it would create more competition between banks and credit unions.

“I think that would be a great benefit, not only to the credit union industry, but for the businesses who are looking to get loans,” Schmidt said. “As I’ve seen it, under the current cap, it’s restricting competition for those business loans between banks. As a result, many business owners aren’t getting the benefits that the extra competition from the credit unions could provide, as so many of these credit unions are nearing their cap.”

The bill includes strict criteria that credit unions must meet before they can gradually increase their lending caps. Schmidt said these include the ability to demonstrate sound underwriting capabilities, strong management capital, staff with at least five years of business lending experience and a sustained level of small business lending at about 80 percent of the current existing cap for about a year prior to application.

“It appears to very much take into consideration not allowing credit unions to get in this arena without the structure in place to do so prudently,” Schmidt said.

Schmidt said the Credit Union of the Rockies currently has a little over 5 percent of its assets in business loans, and uses a third party to help them underwrite those loans. The company has just hired a new vice president of lending with 20-plus years of commercial lending experience to help them grow in that arena.

“Because we haven’t had historically a whole lot of internal experience, haven’t done much to try to seek out additional business loans,” Schmidt said. “One of Credit Union of the Rockies strategic objectives is to hopefully serve our business members with that excess cap room. The idea of this bill, making that cap even larger, would be very beneficial for us to sustain the kind of growth that were hoping to get.”

Udall’s press release states that Coloradans want to expand their businesses and start hiring again as the economy recovers, but are struggling to get loans from tightened bank credit markets. Schmidt agreed, and said the bill would definitely serve to create jobs.

“Right now, for so many businesses, the key thing I hear time and time again is that they have good growth opportunities, they have exciting things they could be doing, but getting financing has become so difficult that they are looking at alternative sources of financing that are much more costly. Maybe so costly, that it no longer makes sense for them to expand or go down that path they normally would in a regular economy,” Schmidt said. “This bill, if it’s passed, would allow us to be another provider of that credit and by extension, allow those companies to grow and create more jobs”

Udall previously introduced legislation similar to this bill in the 111th Congress. He is introducing this bill as an amendment to a small business bill sometime this week.

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