What's causing banks to feel the pressure from credit unions? Legislation that is on the docket with congress which would allow credit unions (CUs) to increase their small business lending ratio from 12.25% to 27.5% of their overall assets. This legislation is over a decade in the making due to the efforts of credit unions across the country lobbying to increase the lending ratio in question. The vote on this legislation is expected to happen as early as the end of April.
It's believed this bill, which is sponsored by House majority leader Harry Reid, could create 140,000 new jobs in the small business arena. This is making banks quite uneasy at they believe that credit unions will under cut them in lending since CUs are not subject to federal income taxes.
If passed this legislation would open up a brand new arena of lending for numerous credit unions. Due to the lending cap of 12.5% many CUs are not currently lending to small businesses as they'd hit the cap after only a few loans. Proponents of the bill believe it will be monumental in the way that CUs do business and that it will only add to the credit union advantage!
If your local credit union offered small business loans, would you get in line for a loan application?