Because credit unions typically charge less than banks on loans, a business that borrows from a credit union is likely to pay a lower interest rate than it would at a bank. This increases the taxable income of the business by redueing its deduction for interest expense. We do not have specifie data on interest rates on business loans at credit unions 65 18 compared to banks. However, across the board, credit unions charge lower loan rates, fewer and lower fees, and pay higher rates on deposits than do banks. This is evidenced by the lower return on assets (net income divided by assets) at credit unions eompared to banks.
The credit union return on assets is lypieally about a pereentage point below that at banks. Therefore, on those new business loans made by credit unions that would otherwise have been made by taxable lenders, the same transaction that reduces the taxable income of the bank increases the taxable income of the borrower (reasonably approximated by a 40 basis point reduction in deductible interest expense). Once all of these factors arc included in the analysis, the overall score for the bill would likely be reduced substantially. We believe in practice, an increase in the credit union member business lending cap would actually reduce the federal deficit because the new business loans that did not crowd out bank lending would stimulate growth at small businesses, increase employment and incomes, and hence tax revenues.
And when they ask me why Congress will not let credit unions do more business lending, there is truly Utah personal loans for bad credit just one answer. There arc a lot of reasons to let credit unions do more small business lending - at least 140,000.
But there are no sound publie policy reasons not to. Failure to expand the credit union member business lending cap would literally leave money on the table that could be loaned to small business. The bankers say business lending is not a part of the credit union mission. The facts show that credit unions have been doing business lending since day one. The earliest credit unions were founded so that people could borrow money to buy goods at lower cost and sell them for a profit.
The founders of the Utah personal loans for bad credit American credit union movement very specifically noted the important role credit unions should play in providing access to credit for small businesses.
To all of them as well, the cooperative offers financial assistance that is most precious.
Serving the business borrowing needs of credit union members is Utah personal loans for bad credit not only a part of the credit union mission, it is part of the credit union DNA. Congress imposed a statutory cap on credit union member business lending in 1998 at the behest of the banking industry which opposed the Credit Union Membership Access Act of 1998. Existing safeguards, coupled with the new capital and other reforms in the bill, arc sufficient to protect against any safety and soundness risk from member business loans. Furthermore, most credit unions have excess liquidity today which is depressing their overall earnings. Moving assets from low-yielding investments into higher-yielding member business loans, even after accounting for credit losses on those loans, will increase credit union earnings, capital contributions, and, importantly, overall safety and soundness. Credit unions arc committed to operating in a safe and sound manner, which is why we sought the guidance of the Department of Treasury and the NCUA in developing legislation Utah personal loans for bad credit to increase the credit union member business lending cap in a manner that docs not jeopardize credit union safety and soundness. It is a contradiction - and the bankers arc wrong on both counts. The member business lending cap affects every credit union that has a member who looks to them for financing a new or existing small business. As noted above, member business loans have been the fastest growing component of credit union lending every year since 2001. That growth in credit union member business loans is now slowing as more and more credit unions approach their caps. The credit unions that arc now near the cap account for over half of the business loans subject to the cap. Having been there for their small business-owning members over the last several years, these credit unions will see their ability to continue this service diminish in the absence of Congressional action to increase the business lending cap. In fact, credit union member business lending actually helps local communities, ineluding community banks, by stabilizing the local economy and creating jobs. Raising the credit union business lending cap is equivalent to an increase in the supply of business credit. Unless the demand for business loans were totally price inelastic, that increase in supply would lead to some increase in loans (i. Recently, researchers at the Federal Reserve Board estimated a semi-elasticity of demand for unsecured business loans to be -1. John C, and Fgon Zakrajsek (All of the Division of Monelaiy Affairs. Increasing the cap - rather than removing the cap - guarantees that the increases in member business lending would be accomplished while eredit unions remain primarily focused on consumer lending. If the member business lending eap was to be increased, and an additional 15. The bankers say that credit unions should not be granted an expansion of powers because of their tax status. This specious and sidetraeking argument ignores the faet that roughly 2,500 banks are Subchapter S institutions, and. The credit union tax status, which has been reaffirmed by Congress several times, is based on the structure of credit unions as not- for-profit, democratically-controlled cooperatives. That stmeture has not changed for the past 100 years.