As our nation continues to climb out of this long recession – there are still pockets of the United States that feel like we haven’t made enough progress. In speaking to small business owners in my state, I know they are still weathering the storm, looking to invest in a down economy and are eager to begin hiring again. That is why I am both glad that we are once again debating a small business bill and that I have the chance to reintroduce the bipartisan Small Business Lending Enhancement Act as an amendment.
In some ways though, I feel like this is Groundhog Day – all over again. Back in October of last year a report by the New York Federal Reserve said that three-quarters of small businesses looking for credit last summer were turned down or received only some of the financing that they requested. They stated “Reports from small-business owners of a credit gap have been both vocal and frequent.” So we here in Congress decided to act on and try to extend additional credit to small businesses – because more credit means additional growth and increased job creation.
But unfortunately, we created a $30 billion lending fund for banks without simultaneously allowing credit unions to increase the amount of money they lend to small businesses. Since that time, banks have been reducing credit availability. And even after receiving the $30 billion of taxpayer money in last year’s Small Business Jobs Act, banks still are not meeting the demand for small business loans.
In light of this, I am still very committed to finally taking the common sense step of allowing credit unions to increase the amount of money they can lend to small businesses. I have once again introduced the bipartisan Small Business Lending Enhancement Act, which would open up additional credit to small businesses without costing taxpayers a dime. Let me say this again – without spending a dime of taxpayer money.
These credit unions know small businesses in their communities that need loans to expand and hire, and the credit unions have money to lend them. Unfortunately, federal law still limits the amount of small business loans a credit union can extend to 12 percent of their assets. Nearly 350 credit unions, accounting for approximately 60 percent of all business loans subject to the 12.25 percent cap, are facing their cap and will have to dramatically slow their business lending. Can you believe that? Government is telling these financial institutions that they cannot help create jobs in their local communities. That is why my amendment would double the amount of money credit unions can offer small businesses.
We’ve all met these small business owners. One Coloradan that I was particularly compelled by was named Stacy Hamon. Stacy is a small business owner in Thornton, Colorado, who started her own business: 1st Street Salon. Initially, Stacy went to a traditional bank, only to be turned away because credit was in short supply. To make the dream of owning her own business come true, Stacy turned to a credit union, which gave her the loan she needed through a second mortgage on her home.
Stacy’s salon has become successful. And when I visited she had plenty of business and had even hired more workers. Those are real American jobs and a shining example of economic expansion that would not have been possible if it weren’t for a credit union that was willing to offer her a small business loan.
Another Coloradan I’d like to mention is Lisa Herman of Broomfield. She e-mailed me her success story about securing a credit union loan to expand her business. Lisa is the co-owner of Happy Cakes Bakeshop in Denver’s Highland Square neighborhood, and has been in business since 2007. Despite the troubled economy, Lisa’s business blossomed, with revenue by the summer of 2009 up 25 percent over 2008.
She wrote that Happy Cakes was booking at least 20 weddings a month and her retail operations increased to the point that she needed to expand her operations and move into a new shop. Her efforts to secure a loan through a traditional bank did not pan out. But her local credit union was able to provide her with the loan she needed to continue to grow her successful business. That meant more jobs and more business for her community. That is the American way.
Now I know that banks and credit unions are competitors and do not always get along, but this is not about them – it is about small businesses. And, for perspective, credit unions today only represent 4.5 percent of all small business loans at depository institutions. If we take this common sense step and double small business lending by credit unions, it would still leave at least 91 percent of the small business market to banking institutions. This is a smart, no-cost way of increasing lending without drastically changing the composition of the small business lending market.
Since some of my colleagues I know have been visited by folks who do not want credit unions to lend more to small businesses, I want to make one thing clear: Credit unions have been making small business loans since their inception in the early 1900s. And it wasn’t until 1998 that there were any limits whatsoever on how much they could lend. That means that for 90 years credit unions were free to help small businesses in their own communities without the federal government unnecessarily getting in the way. That meant uninhibited small business support, growth and job creation – but right now the federal law is keeping these jobs from Americans who are out searching for work.
It’s estimated that the average credit union small business loan is approximately $220,000, and each $92,000 in additional lending on the part of the nation's credit unions will create one additional job. In the next year, credit unions business lending could increase over $10 billion, helping small businesses create over 100,000 new jobs if Congress increases the statutory cap on credit union business lending.
I want to just say it again for the record: These simple statutory changes would not cost taxpayers a cent, but they would dramatically increase the amount of private capital available to small businesses to help make payroll, buy inventory, and expand and innovate. Moreover, these proposed statutory changes are safe and fully supported by the National Credit Union Administration – the credit union regulator – and are the product of an agreement reached last year by the Senate Banking Committee and the Treasury Department.
Other organizations that support increasing credit union small business loans include: Americans for Tax Reform, the National Association of Realtors, the National Small Business Association, National Association of Manufacturers, the Heartland Institute, the Competitive Enterprise Institute, League of United Latin American Citizens, National Cooperative Business Association, National Farmers Union, the Hardwood Institute, National Council of Textile Organizations, and many others.
I urge my colleagues to do the right thing and let’s finally fix this unnecessary federal limit on small business loans, and support this bipartisan amendment to increase job growth and support for our local small businesses.
I believe my amendment is at the desk. I ask unanimous consent that the pending amendment be set aside and that the Udall amendment be called up, and I ask for its immediate consideration. (Credit: The Hill Blog)
To find out more about legislation and news related to small businesses and credit unions, visit the
LSCU Press Room.