Famed Chicago architect Daniel Burnham would always invokethe words “Make no little plans; they have no magic to stir men'sblood” when designing a building or planning the Chicago World'sFair Exposition. In following his own advice, Burnham pursued everyproject he undertook with the commitment to push the limits. Makeit the best and create something people would always remember. Hewas a bold thinker, had great vision and was never afraid to takechances.

This fall, the NCUA board has an opportunity to show they havevision and are willing to take a bold step. They will consider andvote on expanded business lending authority for credit unions. Theproposed rule changes were a long time coming, and if approved,will provide a great opportunity for credit unions to furtherenhance their ability to promote and foster the growth of thebusiness sector.

During the six years I sat on the NCUA board, I advocated forand supported efforts to give credit unions the ability to providetheir members with loans to open and operate businesses when otherfinancial institutions would not.

Credit unions, even during the most difficult economic times,were there for their members. They were ready and willing to helptheir members' businesses in order to keep people employed and spurthe economy.

The one change that is proposed, which I feel would bedetrimental to credit union operations and not condone a safe andsound best business practice, is the elimination of the personalguarantee for business loans.

When an individual goes to their credit union and asks forfinancial help to open, expand or continue the operation of theirbusiness, they are asking the other members of the credit union tohelp them. They are asking to use the funds other members haveplaced on deposit to support their venture.

When an individual is given a loan, they accept it withconditions and responsibilities. Business owners work hard everyday to ensure the success of their business. They do so for theirfamilies, their employees and their desire to succeed. But mostimportantly they must do it for their fellow credit union memberswho lent them the money. They must acknowledge that vote ofconfidence by repaying the loan they received.

A personal guarantee means the borrower promises to repay theirloan regardless of whether the business succeeds or fails. It is apromise to make sure the credit union members do not suffer a lossfor the faith they placed in the borrower's business.

Requiring a personal guarantee is a sound business practice.Financial institutions across the country require it for anybusiness borrowing funds. It provides a layer of security andprotection for the institution and heightens the responsibility ofthe borrower to repay the loan.

Those who argue that requiring a personal guarantee inhibitscredit unions from making loans are misguided. Saying that theelimination of such a guarantee will allow more loans to be mademay be true, but it immediately raises questions of loan quality,member responsibility and protection from a loss. And for those whosay that banks do not require it and therefore have an advantageover credit unions, I would ask where those banks are located andto see their loan losses.

All the other proposed changes to the MBL regulations I believeare within the jurisdiction of the NCUA board and will providecredit unions all they need to operate a successful businesslending program for their members. Having a personal guarantee aspart of that program will only enhance its operation.

Michael E. Fryzel

Attorney

Chicago, Ill.