An “antiquated and arbitrary” lending cap keeps credit unions from being able to work with community development corporations to offer Small Business Administration loans to companies, Natasha Merz, vice president of commercial lending at Langley Federal Credit Union, told a House Subcommittee Thursday.

During the past six years, small business lending at Langley has grown from $7 million to almost $110 million, said Merz, whose credit union is located in Newport News, Va. and has almost $2.4 billion in assets

Merz testified on behalf of NAFCU at the House Small Business Economic Growth, Tax and Capital Access Subcommittee.

She said that despite that loan growth, credit unions are hampered in participating in the SBA's 504/CDC loan program, which pairs financial institutions with community development companies in offering loans to small businesses.

The 504/CDC program assists lenders provide small businesses with long-term financing to acquire and improve fixed assets. The financing may be made with as little as 10% owner equity.

“Unfortunately, an antiquated and arbitrary member business lending cap prevents credit unions from doing more for America's small business community,” Merz told the subcommittee.

Federal law establishes a Member Business Loan cap on credit unions. The NCUA board recently issued rules making changes to that cap. Those changes were challenged in federal court by the Independent Community Bankers of America. That case has been dismissed.

Merz told the subcommittee that the government-guaranteed portions of SBA loans don't count against the member business lending cap, but the non-guaranteed portion do.

She said Congress could increase credit union participation in the SBA program by exempting 504/CDC loans from the MBL cap.

Instant Insights /

MBL Cap Hampers Credit Union Participation in SBA Program

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