The tough credit climate is well known – especially by many small businesses.
Today’s Wall Street Journal has an interesting article titled “Small Businesses Find a New Source for Funding” that looks at credit unions as an option for some small businesses in order to get loans.
The piece makes a few points that you might not be aware of when it comes to how credit unions function:
• “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.”
• “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.”
• “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.”
• “Keith Leggett, a senior economist at the American Bankers Association, says credit unions were established to serve ‘people of modest means’ and should focus on consumers. Changing the 12.25% lid ‘would allow them to venture into making larger commercial loans,’ which may give credit unions -- which are tax exempt -- an unfair advantage over ‘the community banks that they are competing with for customers,’ he says.”
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
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