Credit unions are happily going where banks and lenders fear to tread, offering lines of credit to small businesses and would-be homeowners who cannot qualify for financing with lenders who are still “licking their wounds” after the mortgage meltdown and economic recession[1]. In fact, many credit union officials have expressed interest in commercial lending recently – something that has not historically been part of credit unions’ “core function.” However, before credit unions can truly enter this lending arena, they need a regulatory cap on business lending for nonprofit entities lifted, something that – not surprisingly – banks and conventional lenders oppose. Currently, credit unions can make loans equaling up to 12.25 percent of their total assets. Credit unions hope to more than double that cap, taking it to 27.5 percent.

Even without the cap lifted, credit union business lending is up 5 percent while bank business lending is down 3 percent, according to numbers from the Credit Union National Association (CUNA)[2]. Historically, credit unions have made more personal loans, such as loans for homes and cars, but with slow consumer demand for such loans, credit unions are looking to push into more business and commercial lending. “[Credit unions] are improvising strategies to do business lending” in order to find new sources of borrowers, explains Pat Keefe, CUNA spokesman.

Do you think that credit unions should be able to expand into other arenas of lending?

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[1] http://www.desmoinesregister.com/article/20110710/BUSINESS/107100306/-1/gallery_array/Credit-unions-business-lending-rises

[2] http://www.usatoday.com/money/industries/banking/2011-07-11-credit-unions-small-business_n.htm