The good news is that as early as this week, Colorado Senator Mark Udall’s proposal to help small businesses finance their growth will come to a vote in the United States Congress.
The bad new is that despite the very strong merits of Senator Udall’s legislation – which stands to generate more than 100,000 new jobs in the first year alone without costing taxpayers a dime – the bill may well be squashed by powerful special interest groups.
Business owners and entrepreneurs who want to expand their lending options – especially in this tight economy – are being encouraged to act immediately by signing a petition available on Senator Udall’s web site at: www.markudall.senate.gov/smallbizjobs.
In simple terms, Senator Udall’s bill, dubbed the Small Business Lending Enhancement Act, would allow credit unions to compete more effectively with community banks and large commercial banks in lending money to creditworthy small businesses.
“Banks have been reducing credit availability, and even after receiving $30 billion of taxpayer money, banks still are not meeting the demand for small business loans,” notes the Credit Union National Association, a strong backer of the Small Business legislation.
Senator’s Udall’s proposal has bipartisan support. In the House, the two lead sponsors are Rep. Ed Royce(R-Calif.) and Rep. Carolyn McCarthy(D-N.Y.) In the Senate, even conservative Republican Senator Rand Paul has expressed his support for the measure.
“There are a lot of small businesses right now that are not getting the lending that they need,” contends Scott Earl, president and CEO of Mountain West Credit Union Association, in an interview.
Earl’s remarks echo those of Senator Udall, who last week wrote his constituents asking for their support and observing, “Colorado small businesses are starving for credit.”
If Senator Udall’s bill is approved, Earl estimates that in the first year it could provide $10-12 billion in additional loans to small businesses. Given that the average credit union business loan is roughly $219,000, that would mean Senator Udall’s bill would help almost 55,000 businesses out of the gate.
The case against Senator Udall’s proposal is being made almost exclusively by the influential banking lobby, which back in 1998 helped push through an arbitrary 12.25 percent cap on the portion of a credit union’s assets that can be lent to small businesses.
Senator Udall’s bill calls for raising that ceiling to 27.5% - and in doing so, clearing the way for credit unions to help finance hundreds of thousands of cash-starved small businesses.
To the extent that the banking lobby has a case to make other than pure self interest, it asserts that loosening the reins on credit union lending to small businesses could result in irresponsible lending, which in turn might result in a rise in defaults and ultimately taxpayer liability.
The argument seems specious at best, given the credit union industry’s admirable lending track record to date.
In an interview, Tara Trujillo, Senator Udall’s Denver-based communications director, says that the Senator’s bill includes additional safeguards, ironed out with the help of the U.S. Treasury, to help prevent lending abuses.
Under the Senator’s plan, in order to take advantage of the higher business lending cap, credit unions will have to be well capitalized; they will have to have a five-year track record of providing small business loans; they will have to pass muster with an industry-sponsored oversight group; and even, then, they will only be able to loan less-than-one-third of their 27.5% capacity each year.
The full interviews with Trujillo and Earl of Mountain West Credit Union Association, will be broadcast on the Sunday, April 1st edition of 710 KNUS AM’s weekly radio newsmagazine, Business Unconventional.
- Audio Clip: Tara Trujillo explains safeguards contained in Senator Udall's measure
- Audio Clip: Scott Earl talks about who benefits most from the legislation
- Audio Clip: Scott Earl explains why taxpayers are protected
In his letter to constituents, Senator Udall writes, “For the past 15 years, small businesses have created two-thirds of all new jobs, but the recession has cut off a lot of their access to capital.”
The Senator describes the current push to approve his credit union/small business finance bill as “a battle between David and Goliath.”
Trujillo says that Colorado small business owners and employees can help “David” by signing the online petition (www.markudall.senate.gov/smallbizjobs) and calling other members of the Colorado Congressional delegation urging them to support the measure.
* Audio clips courtesy of Business Unconventional. For more information visit: www.BusinessUnconventional.com