More than 1,000 credit unions were told by the NCUA on Tuesdaythat they can use a simple opt-in reply to become a Low-IncomeDesignated Credit Union.

That designation exempts the credit union from the 12.25% cap onmember business loans and should free from $250 million to $500million in business lending if all 1,003 credit unions sent theletter from the NCUA on Tuesday decide to participate, the agencysaid.

That could double the number of existing LICU credit unions, theagency said.

The LICU streamlining process – which allows credit unions toopt-in to become a LICU with a simple reply rather than go throughthe traditionally required paperwork – was part of a drought reliefand recovery package announced by President Obama at the WhiteHouse on Tuesday.

The NCUA said of the LICU-eligible institutions, there are 470federal credit unions – representing 47% of potential new LICUs,52% of potential new assets and 54% of potential new members –headquartered in states that the federal government has identifiedas being in “extreme” drought conditions.

“With this initiative, we are cutting regulatory red tape andexpanding access to capital for small businesses, which shouldtranslate into job creation,” said NCUA Board Chairman DebbieMatz.

“Providing small businesses with the money needed to open theirdoors, create jobs, or expand operations will help our economy.This action is particularly timely for the 27 states devastated bythis summer's historic drought,” Matz said.

Besides member business lending cap being waived, other benefitsof LICU designation are eligibility for Community DevelopmentRevolving Loan Fund grants and low-interest loans, ability toaccept deposits from non-members, and authorization to obtainsupplemental capital, the agency said.

To qualify as a Low-Income Designated Credit Union, a federalcredit union's membership must meet low-income thresholds based on2010 Census data.

“Member business lending by credit unions sensibly diversifiesportfolios and fills a market need,” Matz said. “Credit unionsoften make the small business loans that other lenders avoid. A2011 Small Business Administration-commissioned study also foundthat more than 80 cents of every dollar in credit union memberbusiness lending is an entirely new source of capital not availablein the market today.”

The credit union and banking industries are currently waging a lobbying war in Congress over proposed legislationthat would raise the MBL cap.

The average member business loan for all credit unions is$223,000. More information from the NCUA about the new LICU effortisonline.