Lenders are seeing pent-up demand from businesses to seize opportunities to grow, according to a Monday article on NJBIZ.com. The article, titled “Firms are Cautious but Active”, cites examples of both banks and credit unions across New Jersey that are seeing an increase in loan demand from businesses.
However, business lending by credit unions is restricted by a federal law that caps their commercial loans at 12.25 percent of assets, the article notes. Credit unions “face vigorous opposition from commercial banks, which argue that increased powers for credit unions would be unfair, since credit unions are member-owned institutions and generally exempt from state and federal corporate taxes.”
Marc Sovelove, senior vice president of Financial Resources FCU, told NJBIZ that his credit union may hit the cap within the next year. Alan Feigenbaum, president of Advanced Financial FCU, told NJBIZ that his credit union is already at the cap. If not for the cap, “we could certainly add at least another $2 million in commercial loans, maybe more, and fairly quickly,” said Feigenbaum.
Bankers oppose raising the cap for credit unions, arguing that credit unions have tax advantages and pose serious competition to community banks in small business lending. Paul Gentile, president/CEO of the New Jersey Credit Union League, told NJBIZ that in New Jersey, the average size of a credit union business loan is $171,000, and “a lot of banks don’t want to touch loans that small. … It’s important to have credit unions making those smaller business loans and filling that niche.”
Affinity FCU, the state’s largest credit union, averages large loans, in the $2 million to $3 million range, but the credit union is open small lending as well. Bob Birkhahn, senior vice president of commercial lending at Affinity FCU, told NJBIZ, “we’re happy to lend $100,000 to $250,000. Businesses need capital, and while some are slow to expand, they need funds to run their day-to-day.”
Click here to read the NJBIZ article in its entirety.