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Proposed bill may spark rise in credit union biz lending Premium content from Birmingham Business Journal - by Antrenise Cole , Staff Date: Friday, August 12, 2011, 5:00am CDT

Antrenise Cole Reporter Email Twitter Credit unions are pushing for legislation that would give them the opportunity to beef up their member business lending.

Patrick La Pine, president and CEO of the League of Southeastern Credit Unions, said in the same way that credit unions help their members buy a home, a car or save for their futures, credit unions also want to serve their small business needs.

“Small business lending is a natural continuation of the personal relationship credit unions have with their members,” he said.

National credit union associations have asked Congress to lift the cap on member business lending. Current law caps it at 12.25 percent of a credit union’s total assets. Legislation pending in Congress would boost that to as high as 27.5 percent.

Doing so would open up more opportunity to offer member business loans, inject $13 billion in loans into the economy and create as many as 140,000 new jobs, according to the Credit Union National Association. For Alabama’s small businesses, according to analysis by the CUNA, this would mean more than $205 million in small business lending, creating an estimated 2,230 new jobs.

“With the economy remaining sluggish and unemployment teetering near 10 percent, this seems like a very sensible and cost-effective way to encourage small business growth and job creation,” said Glenn Bryan, senior vice president of Legacy Community Federal Credit Union.

Benton Gup, chair of banking at the University of Alabama, said if credit unions are able to increase business lending, they shouldn’t be able to continue to have a tax exemption that banks don’t have.

Unlike banks, credit unions have tax-exempt status since they are organized as nonprofit cooperatives owned by their members.

“My view is that if they want to act like a bank in terms of their loans and services, they should be taxed and regulated like banks to make a level playing field,” Gup said.

Doug Key, CEO of Mutual Savings Credit Union, said he doesn’t think a growth in credit unions’ business loan products would cause a competitive relationship between credit unions and banks.

“We have always had good relationships with banks in regards to business lending,” he said.

“Rather than looking at it competitively, consider the value that small business loans bring the Birmingham market.”

Stanton Davis, vice president of marketing for Alabama Telco Credit Union, said Alabama Telco currently does not have a strong business loan portfolio, but it is developing a new line of cost effective business services that will cater to current and prospective businesses. He said the credit union will target small businesses with a revenue threshold of $5 million and below.

“Our move to develop a strong business services suite of products comes from a demand our current consumer members have asked for,” he said.

Alabama Telco is not near its member business lending cap, but a new lift would allow the credit union to deepen its loan portfolio to assist more businesses in need, Davis said.