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There is a pending legislative bill that will raise the lending cap of credit unions from the current mandated 12.25% of their total asset size to about 27%.  If approved, this will substantially benefit small business owners and improve the economy says Brian Martin of the Progressive Policy Institute.  Sen. Mark Udall, sponsor of the Small Business Lending Enhancement Act, says his bill addresses small businesses that are “often too small to be worth the banks’ time or they just don’t fit the lending guidelines of the banks’ corporate headquarters.”  The Credit Union National Association says this will amount to $13 billion more for small businesses and spur job creation.

The bankers, on the other hand, are opposing this bill because it gives credit unions “unfair tax and regulatory advantage”.  Banks also argue more loans by credit unions will increase the federal deficit, as reported at Entrepreneur.com.

The nation’s small businesses have struggled to get anybody to loan them money since the Great Recession started. Meanwhile, banks and credit unions have been fighting over who deserves the right to make loans to them. And as the JOBS Act works its way through Congress, that battle has grown fiercer.

Currently, credit unions are legally mandated to lend out no more than 12.25 percent of their total asset size to businesses. For nearly a decade, there has been legislation bouncing around Capitol Hill that would increase the authority of credit unions to be able to lend out 27.5 percent of their total assets to businesses.
Senator Mark Udall (D., Colo.), the lead sponsor of the current iteration of the legislation, called the   Small Business Lending Enhancement Act, introduced his bill to be considered for inclusion in the Senate’s version of  the JOBS Act that the House passed last week.

If passed, small business owners would have access to more capital. “Raising the cap could substantially benefit smaller business owners and in turn the economy at large,” wrote Brian Martin of the Progressive Policy Institute, a Washington D.C. think tank, in a paper on helping ease the small-business credit crunch, at the end of last year.

Meanwhile, the banking community is doing everything it can to prevent the bill from becoming law.

The banking industry says that to allow credit unions, which are tax exempt and have a unique regulatory set of guidelines, to increase their lending to small businesses gives them an unfair tax and regulatory advantage.

Banks also argue that by allowing credit unions to make more loans to small businesses that would otherwise be made by tax-paying banks increases the federal deficit. The especially tricky part of the bill for Congressional delegates is that it pits them against two groups of constituents that they want to support — community banks and credit unions. …

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