|
|||||
 |
 |
||||
| |||
Wisconsin CU League News Release - 10/26/09Credit unions stand ready to rescue businesses imperiled by credit crunchThe not-for-profit, member-owned institutions are filling lending void noted by banking trade group
Pewaukee, Wis. - If a bank has
turned you down for a business loan, don’t give up – contact
a credit union. That’s the advice of The Wisconsin Credit Union
League, the trade association representing 240 of the not-for-profit,
member-owned financial institutions.
“Since their inception, many
Wisconsin credit unions have been making loans to members for business
needs, and because they didn’t get caught up in the risky lending
practices so many institutions engaged in they are financially strong
and ready to make loans using the same sound criteria they’ve
always used,” says Brett Thompson, League President &
CEO.
He was reacting to claims in the press
by Wisconsin Bankers Association President Kurt Bauer that pressure from
regulators is forcing for-profit banks to restrict credit to otherwise
creditworthy borrowers. Not-for-profit credit unions have been applauded
by examiners for their relative strength and stability, Thompson
says.
“Credit unions literally have
billions to lend but aren’t always the first to come to mind in
the business community because banks have always dominated the market
for business loans,” he says. Wisconsin banks control 97.7% of the
marketplace for business loans. By contrast, credit unions have just
2.3% of the business loans in the state.
“Banks have achieved this market
share by making the big, multi-million dollar loans that drive profits
for their shareholders,” Thompson says.
Credit unions, he explains, are willing
to make smaller loans and offer other free services to help
entrepreneurs understand and manage costs – because they have no
shareholders, only members looking to the institution they jointly own
– a financial cooperative – for help. A U.S. Treasury study
found that more than half of credit unions’ member business loans
go to households with incomes below $50,000 – a niche that only
not-for-profit lenders typically value.
“Credit unions’ average
business loan is a mere $139,746 – an amount banks may consider an
unprofitable pittance but for business owners is critical
funding,” Thompson says. “For many businesses, being denied
credit now is a death knell. And it’s not because the business
isn’t viable. If their financial institution would help
them, these are firms that will weather the current economic storm. And
in many cases, they’re trying to avoid further job cuts, so
keeping credit flowing to these enterprises is critical to healing the
economy,” he adds.
Thompson says credit unions have
related stories about helping entrepreneurs who – despite having
stellar credit histories and significant equity and assets – came
to credit unions after banks refused a loan request deemed “too
small.” Members have also come to credit unions after banks have
unexpectedly pulled credit lines despite borrowers making timely
payments – leaving businesses in danger of folding.
“The situation you’re
seeing – banks avoiding modest loan needs – will never
change. Banks’ priority is profit-making. Credit unions’
priority is serving members. So they’re not competing for the same
loans,” Thompson emphasizes. “If banks don’t want the
kind of loans credit unions make as a matter of routine, there’s
no sense in inhibiting businesses. The law has to
change.”
Thompson is referring to federal
legislation that currently restricts credit unions’ business
lending to 12.25% of assets or 1.75 times their net worth, whichever is
lower. The limit, applicable only to credit unions, was enacted a decade
ago at the urging of the for-profit banking lobby, which cited a concern
for safety and soundness that has proved to be groundless. In
2008, for example, Wisconsin credit unions had one-tenth the business
loan net-charge off rate of Wisconsin banks, 0.23% vs.
2.06%.
Thompson says that lifting the cap
could inject as much as $10 billion into the national economy in the
first year alone without costing taxpayers a dime and without expanding
government. Some credit unions that have money to lend are
currently up against the cap.
“Credit unions have been making
safe, sound business loans to members since the first credit union in
America was formed 100 year ago,” Thompson adds. “Preserving
an arbitrary limit on these loans only hurts our nation’s economic
recovery as well as the 90 million members who depend on a local
business for their livelihood.”
Members’ funds are safe at credit
unions because they are insured to $250,000 per account by the National
Credit Union Administration (NCUA), an agency of the federal
government.
XXX
|
|||
©2005 Wisconsin Credit Union League. All rights reserved. |
|||
