Some Credit Unions Navigating Under 12.25% Cap, But Too Many Forced to Deny Loans Due to Lending Limit, NAFCU Finds
ARLINGTON, Va. -- Despite a continued legislative push to raise NCUA's member business lending cap to 20%, some credit unions are saying the current 12.25% asset cap has not been an impediment to their MBL efforts.
According to NAFCU's September Flash Report, 92% of the 150 credit unions polled said they've managed to continue offering MBLs under the 12.25% asset cap. However, of the credit unions that answered that the cap was a constraint on member business lending, 33% indicated that they denied a member a business loan due to the asset cap.
Some credit unions with active business lending programs have found that having a higher MBL cap would alleviate any cap concerns should they want to go further, said Jeff Taylor, NAFCU senior staff economist.
"Credit unions are looking to the future," Taylor said. "It doesn't take that many loans to ramp up to that [12.25%] level."
Taylor said he spoke with representatives at two credit unions at NAFCU's recent Congressional Caucus who said they had to shut down their business lending programs because they had reached the MBL limit.
"There aren't a lot of options out there, it's complicated and there's not a big secondary market," Taylor said. "Right now, it might not be an issue for your typical credit union but it could be in the future."
In a closely related area, 94% of credit unions polled said that the regulation, which stipulates that all business loans over $50,000 must be applied toward the member business loan cap, was not a significant constraint on their business lending programs. Taylor said the report shows that members continue to demand these types of loans, but having to deny a loan or do something else to free up capital space in order to make the transaction happen could be more commonplace if the MBL cap isn't raised.
Indeed, 61% of credit unions indicated that they offer member business loans while an additional 22% indicated that they intend to do so within the next six months, the report read. Sixty-two percent said that they lacked the expertise to offer business lending, while 52% indicated that their board decided not to offer such loans.
The majority of those polled that offer Small Business Administration loans, 78%, said they have granted SBA loans within the past year. Of the credit unions that have offered SBA loans within the past 12 months, the median length of time they have offered these loans was two years, with the longest running program being 10 years. Additionally, the median outstanding SBA loan balance was $766,884, with the largest outstanding balance being $1.2 million. --firstname.lastname@example.org