An “antiquated and arbitrary” lending cap keeps credit unionsfrom being able to work with community development corporations tooffer Small Business Administration loans to companies, NatashaMerz, vice president of commercial lending at Langley FederalCredit Union, told a House Subcommittee Thursday.

During the past six years, small business lending at Langley has grownfrom $7 million to almost $110 million, said Merz, whose creditunion is located in Newport News, Va. and has almost $2.4 billionin assets

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

She said that despite that loan growth, credit unions arehampered in participating in the SBA's 504/CDC loan program, whichpairs financial institutions with community development companiesin offering loans to small businesses.

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

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

Federal law establishes a Member Business Loan cap on creditunions. The NCUA board recently issued rules making changes to thatcap. Those changes were challenged in federal court by theIndependent Community Bankers of America. That case has beendismissed.

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

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