Member business loans may be the answer for small businesses with fewer than 50 employees, which continue to be among the most vulnerable companies needing credit access.
The Progressive Policy Institute, a Washington think tank, offered that assessment in a recent brief, "The Credit Gap: Easing the Squeeze on the Smallest Businesses."
According to PPI, small businesses with fewer than 50 employees provide as much as 30% of all private sector employment. However, because of their small size, they are much less likely to benefit from government small business loan programs, and they are less likely to win loans from big commercial banks.
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"Smaller businesses clearly need more options for getting credit, and credit unions, which already help many small borrowers finance their self-employment and small business ventures with personal loans, lines of credit and limited business loans, could be an ideal source of credit for these underserved entrepreneurs," PPI said.
The institute noted the 12.25% of assets MBL cap, calling it "arbitrary and outdated."
"Bipartisan proposals to increase this limit – such as the ones offered by Sens. Mark Udall (D-Colo.) and Susan Collins (R-Maine) and Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.) – would help credit unions fill the credit gap that these smaller businesses face. It would also be a sensible and cost-effective way to jumpstart the job creation our country urgently needs," the institute said.
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