Udall Wants Credit Unions to Lend More to Small Business

The following open letter is a part of the Presidio Graduate School's Capital Markets course. For one of the course assignments, students write a letter to an oversight body, government entity or other appropriate institution. The topic: changing the sector of capital markets that relates to their chosen topic so it reinforces principles of sustainability. Follow along here.

An open letter to Todd McCracken, National Small Business Association

Dear Mr. McCracken: We are asking the National Small Business Association to support S. 509: The Small Business Lending Enhancement Act of 2011.  We encourage you to formalize support for S. 509 by issuing a press release that designates it as a NSBA priority issue and an action alert calling on members to urge Congress to support passage of the bill. S. 509 was introduced by the Honorable Mark Udall and currently has 15 bipartisan cosponsors.  The bill would gradually increase the Credit Union Small Business lending cap from the 12.25% to 27.5%. According to Senator Udall this increase is expected to make approximately $10 Billion in additional capital available to small business by the end of its first year, and is also expected to create 100,000 new jobs.  These benefits can be achieved without any additional government spending. As you know, small business is the engine that drives the economy.  The  Small Business Administration’s (SBA) U.S. Small Business Profile, released in February 2011, shows that Small Business accounted for 49.6% of U.S. private sector jobs and made up 99.7% of U.S. employers. However, small businesses are not receiving the capital necessary to help lead an economic recovery.  The SBA’s 2009-2010 Small Business Lending Summary shows that small business loans declined by 6.2% during the same period.  The report also shows that the 34 largest U.S. banks, with assets over $50 billion, were responsible for 42% of this decline.  Similarly, the Treasury Department reported in September of 2009 that the 22 banks that received TARP funds had actually cut their collective small business loan balances by $10.5 billion in the previous six months.  The decrease in small business lending from the banks is depriving small business of needed capital, often forcing owners to secure funding through credit cards,  at higher interest rates and with additional restrictions. Mr. McCracken, credit unions make a better partner for small business. Credit unions are rooted in communities, which allows for targeted focus on serving customers, communities, and especially small businesses.  Furthermore, credit unions’ not-for-profit status enables the provision of more competitive rates and services.  Lastly, the average mega-bank today has decreased lending levels to businesses at a  time when small business owners (and the country) need capital the most. To sum up the reasons for our request for action, credit unions, with the help of the S. 509, will provide the following benefits to the small business community:

• Greater access to capital for small businesses at more reasonable rates
• A reliable partner better able to serve the needs of small business and the communities they operate in
• Increased competition that will help keep banking services affordable for all small businesses regardless of whether they use credit unions

Again, we ask you and your members to support the Small Business Lending Enhancement Act of 2011.  It’s the right idea at the right time, and it’s good for small business.  We thank you for your consideration of this proposal, and are happy to address any questions or concerns you may have. Sincerely, Nicholas Franco Jeff Milum Robin Shank MBA Candidates 2011, Presidio Graduate School