As Banks Shy Away Credit Unions Meet America’s Small Businesses’ Needs

Member business lending continues to outpace other components in credit unions’ loan portfolio. As FDIC insured institutions continue to tighten their lending standards, credit unions are filling in the gap by providing more members with business loans.


According to the Federal Reserve Board's July Senior Loan Officer Opinion Survey, 34% of banks are tightening their standards when lending to small businesses. While the rate of banks tightening their standards has decreased from a year ago, it does not reflect a greater amount of credit availability from banks. It is still more difficult for small businesses to get the loans they need from banks. Credit unions can continue to expand their reach as small business owners are turned away by banks.

During the second quarter, the credit union industry continued to expand into the business lending market. As of June 30th, credit unions reported a balance of $28.1 billion in member business loans, up $3.5 billion, or 14.4%, from the year before. Quarterly growth was 3.9%, outpacing first quarter's growth figure of 3.0% but down from 5.9% a year earlier.

Recognizing opportunity, more credit unions are offering their members business loans. Starting in the fourth quarter of 2008 the NCUA began tracking whether or not credit unions offer business lending programs. As of June 2009, 1,959 credit unions reported offering small business loans to their members, a modest increase from the 1,933 credit unions as of March of this year.

As credit unions expand their footprint in the small business lending market, some of the asset quality issues plaguing the nation have affected the business portfolio. As of June, 93.0% of credit unions' member business loans were commercial real estate loans, which have experienced a large decline in value. As of the end of June, the delinquency ratio was 2.81% up over a full percentage point from the same time a year before when the delinquency ratio was 1.75%. Despite the increased delinquency ratio, credit unions have continued to originate strong loans for local small businesses.

The NCUA has recently made several new additions to the 5300 call report which can help credit unions more accurately measure their performance in business lending. If you are interested in learning more about credit unions and their opportunity in expanding into small business lending please contact me at