Hagan Voices Strong Support for Raising CU Business Lending Cap (February 2010)
U.S. Senator Kay Hagan voiced strong support for raising the credit union member business lending cap at a Small Business Roundtable organized by the NC Credit Union League and Truliant Federal Credit Union on Tuesday. Hagan's support was aimed at helping small businesses in the State gain access to credit in an effort to grow and create jobs. Hagan's support of raising the cap is one of many steps she notes she is taking in an effort to reduce the 11% unemployment rate in the Tar Heel State.
The hour long meeting between Hagan, small business owners, representatives of Truliant and Local Government Federal Credit Unions & the League allowed the Senator the opportunity to hear first-hand the work that credit unions have done to assist consumers and small business owners.
Hagan opened the meeting by praising the efforts of credit unions to lend during the recession. "You are playing such an important role in getting the credit flowing," she said. Hagan went on to outline efforts in Washington to raise the business lending cap and cited statistics from CUNA that show passage of the legislation would provide $10 billion in credit to small businesses in the first year.
"I support your efforts in this," Hagan said "in order to extend credit for our small businesses and to create jobs."
Hagan noted her support stems from the stories she's hearing from small business owners in NC. "Everywhere I go small businesses are telling me that they're having trouble getting credit, that their bank lines are frozen and that ultimately they're going to go out of business," Hagan said.
Small business owners at the roundtable discussion echoed those thoughts, with many sharing accounts of how they had been denied credit by a bank. Relating his experiences in the construction industry, Developer John Marks said that, "many small businesses today are being forced out of business because of institutions that are shutting the door on them." (Click here to see a video clip of Marks' comments.)
Marks also shared how Truliant has been able to help him grow his business over the years. "I can't say enough about what they've been able to do," Marks said, "but not only that, they truly care about what they do and they go that extra step."
NCCUL President/CEO John Radebaugh praised Sen. Hagan in her efforts to create jobs and economic opportunity in NC. "As Senator Hagan noted during the meeting, small businesses are the lifeblood of the economy here in NC and throughout the country. We appreciate her efforts to help credit unions provide credit to small businesses and grow the economy out of this recession."
In addition to the remarks by small business owners and Truliant representatives, Local Government Federal Credit Union's Deborah Isenhour was on hand to share the credit union's efforts to lend to local governments, as well as fire and rescue departments in NC. Isenhour, the VP of Financial Services at LGFCU, said that many of these fire and rescue departments had trouble accessing affordable credit even in good times. She added that in many cases, the loans helped these departments replace outdated and in some cases worn out personal safety gear.
The accounts of how credit unions are serving small businesses in NC made a definite impression. "What I think we heard today from the customer base around the table is that the credit unions ... have been a big lifeline to these companies," Hagan said.
Bills introduced in both the House and Senate aim to lift the business lending cap to 25% of assets (from 12.25%) and to exempt certain types of loans from the cap. While it is not clear whether Congress will try to move these bills separately or try to pass the provisions as part of another piece of legislation, it was clear from the tone of the meeting that creating jobs is a key priority in Washington as Congress reconvenes this month.
"We are grateful to Sen. Hagan for her support and look forward to working with her on this important piece of legislation," said NCCUL SVP of Association Services, Dan Schline. "Giving small businesses the tools they need will go a long way to helping our economy heal, and we think this bill will help to achieve that goal."
Coastal FCU Shows Rewards, Challenges of CU Business Lending (December 2009)
As elected leaders in Washington consider raising the cap on credit union member business loans, they may want to look to Coastal Federal Credit Union as a prime example of both the successes of credit unions as commercial lenders, and challenges of the current regulatory environment. The credit union, which began commercial lending in 2001, has been bumping up against the 12.25% cap since 2005.
Like many credit unions offering business loans, Coastal started commercial lending due to member demand. Coastal was originally an IBM credit union, and many longtime members developed their relationship with Coastal through IBM.
"We have a lot of sophisticated members, and some of them would get to retirement age or decide to make a career change," said Peter Van Graafeiland, Coastal’s VP of Mortgage and Business Services. Van Graafeiland added that some of these members had entrepreneurial dreams. "They would come to us and say, ‘Coastal, can you help me? I’d like to start my own business.’"
As a result of this member demand for business services, the credit union launched its commercial lending department in 2001, and rapid growth followed. "We kind of eased into it for a couple of years and then realized it was a very viable opportunity for Coastal," Van Graafeiland said.
Coastal today has four commercial loan officers with more than 100 years of combined experience in business lending. That experience is critical in business lending, since the underwriting and paperwork tends to be much more complex.
Van Graafeiland notes that despite the deep recession, Coastal’s business loan portfolio performance compares exceptionally with any other commercial lender in America. He credits Coastal’s conservative lending philosophy. "We made the determination that we were going to stick to our knitting, and make sure we underwrite these loans very carefully."
In a typical year, Coastal originates about $10 million in business loans. This pipeline of credit allows small businesses to grow, and create jobs in the process. That said, the business lending cap is impeding the credit union’s ability to make more small business loans. "We could easily double our volume and not strain the system," Van Graafeiland said.
He adds that if Congress raises the cap on business lending, it will only change the credit union’s ability to lend, and will not impact Coastal’s underwriting standards. "If anything, we’ll be more conservative. We’re not going to do anything crazy with the dollars we’re entrusted to by our members."
Resource Links on Credit Union Member Business Lending:
In the above video, Champion Credit Union President/CEO Mike Clayton shares how the current structure of Interchange Fees is fair to both merchants, consumers and financial institutions like Champion. Clayton also outlines how proposed changes to the current system would hurt credit unions, consumers and merchants alike.
For more information on this issue, please see this Issue Briefing Paper from the Credit Union National Association.
SBA Demonstrates Need for CU Business Lending February 2004 study by the SBA shows that banks aren’t adequately meeting the business lending need of small businesses and entrepreneurs.
