Thanks in part to the economic climate, many small-business owners are struggling to find the financial capital to fund their business needs. Whether you’re looking for a line of credit; to open a new location, renovate or expand; consolidate loans; or other; chances are, you’ve approached a bank to talk finances. However, bank-funded business loans are largely in decline, leaving many business owners in a lurch.

There may be hope through a local credit union, though. Tax-exempt credit unions initially came about as a means to help underserved communities – whether through a large employer or other localized consumer base. Their loans are traditionally available at interest rates lower than that of other lending institutions. And now, more credit unions are branching into meeting the needs of local business owners.

Federal limits prevent credit unions from allocating many funds to business loans; however, there is a margin for these transactions to occur. Additionally, there are efforts from within the industry to expand their ability to lend to businesses. Both the Senate and House are entertaining potential legislation that would allow for the increased partnership between credit unions and business owners. While banks are opposed to the dynamic, credit unions are riding the momentum of President Obama’s promises to assist small businesses with their financial needs.

Although its said that allowing credit unions to increase these loans would not pass any financial burden along to taxpayers, the President has yet to incorporate this strategy into his plans. Despite this, a Treasury Department representative says they are open to innovative strategies.

In the last seven years, a number of restrictions against business loans were removed from credit unions, aiding them in offering more than $25 billion in additional small-business funding. Regulatory concerns, outspoken banking competitors and federal limitations will likely prevent any widespread growth beyond that, though, unless the aforementioned proposed legislation is signed into law. Even if the limits are raised, credit unions still lend only a small fraction of what banks do to small business owners.

Source:

The Washington Post: Credit unions seek larger share of business loans