This week, Advocates for Independent Business (AIB), concerned over the limited availability of credit for independent businesses, submitted comments to the National Credit Union Administration (NCUA) in support of a proposal that would provide credit unions with more flexibility in meeting the needs of small-business borrowers.
NCUA, an independent federal agency that regulates, charters, and supervises federal credit unions, has proposed a change to its Member Business Lending (MBL) rule. The proposal would replace the current rule’s requirements and limitations on collateral and security requirements, equity requirements, and loan limits, according to NCUA. Among the changes, the proposed rule would allow credit union loan officers to waive a personal guarantee, remove explicit loan-to-value limits, and eliminate the need for a waiver process. It would also clarify that non-member loan participations will not count against the MBL cap.
NCUA said that the proposed rule would “empower credit unions to write their own policies and limits. Nearly 700 credit unions that currently engage in a small level of commercial lending would be exempt from the requirement to establish a policy.”
In its comments, AIB expressed support for the proposed regulation, with a modest caveat about how participation loans that are commercial in nature are regulated. “Limited availability of credit has become a major impediment for new and growing independent businesses, especially those that are small…. Last January, [AIB] conducted a survey of over 3,000 independent businesses and found that, of those that needed a loan in the last two year, 30 percent had been unable to obtain one.”
AIB noted that a major factor behind this troubling trend is that giant banks devote comparatively little of their resources to small business lending. As the banking industry has consolidated, and their market share has grown, overall credit availability for small businesses has shrunk, the group said.
AIB stressed: “[W]e respectively urge the agency to review its proposal with an eye toward ensuring that both the aim and the outcome of the specific regulatory changes will be to enable community credit unions (those under $1 billion in assets that operate in a particular geographic region) to expand their lending to small businesses within their local area. Large regional and national credit unions, like big banks, tend to direct much of their lending to higher dollar-value loans to bigger businesses.”
To download the full text of AIB’s comments, click here.