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Who Suffers If The Credit Union MBL Cap Is Not Raised?

Who Suffers If The Credit Union MBL Cap Is Not Raised? By Gina Ragusa
Published December 12, 2012
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Business owners continue to struggle despite bankers’ insistence that increasing the credit union member business loan cap from 12.25% to 27.5% of assets would not help.

In yet another anti-MBL cap article, Frank J. Capaldo, president/CEO of the Independent Bankers Association of New York State says that he strongly opposes any legislation that would, “have a negative impact on the economy and the ability of local, independently owned community banks throughout New York to serve their customers and communities.”

Capaldo claims that the “Small Business Lending Enhancement Act” is misleading and would put “taxpayer subsidized” credit unions in more of a power position claiming that credit unions are taking advantage of a crumbling economy for their own gain.

Although Capaldo believes raising the cap will negatively impact his industry, Benjamin Geyerhahn, New York director of Small Business Majority sees mounting cap increase support as a positive step toward helping businesses.

In fact, Senator Kirsten Gillibrand is backing the “Small Business Lending Enhancement Act,” furthering groundswell for the legislation in Washington.

"Pushing for passage of bipartisan legislation that would increase New York small businesses' access to credit union loans, Sen. Kirsten Gillibrand yesterday underscored the important role access to credit plays in sustaining small business vitality in our state,” Geyerhahn said in a release. “Small business owners create the majority of new jobs, but are still struggling to grow and hire due to a lack of access to credit. The legislation Sen. Gillibrand highlighted yesterday could help.”

Geyerhahn continues by reiterating that small business owners are having trouble obtaining access to funding. "The vast majority of small business owners agree the availability of credit is a problem for small businesses, according to opinion polling released by Small Business Majority. Six in 10 small business owners polled said it's harder to get a loan now than it was four years ago and another 60 percent have faced difficulty themselves when trying to access loans so they could grow and hire. What's more, 52 percent of those surveyed have turned to credit cards to finance their business.”

While Capaldo claims that most of the businesses he has spoken to need a stronger economy rather than access to credit, the reality of maintaining day to day operations and staying afloat means that these businesses need money immediately and cannot wait until the economy finally recovers.

Business Owners Just Need Capital

As banks and credit unions slug it out about who is right, American business owners continue to sink.

George Scardino, owner of Just In Time Manufacturing in Melbourne, Florida says that despite his impeccable loan repayment record, he has trouble securing funds from big banks. “They’re lending money to the people who don’t need the money. I’ve been in this building for 10 years and have never been late (on a payment),” he tells Florida Today.

Scardino is trying to make ends meet despite having to wait for payments on his orders for up to 60 days. He still pays his bills within 30 days and pays his 10 employees on a regular basis. “It’s a lot of juggling of people as well as products to keep our cash flow going,” he said. “If I had enough cash flow, I wouldn’t need you guys.”

However, as long as the economy continues to struggle, the small business owner will need financial support. According to the American Enterprise Institute, continued tight lending standards are keeping business owners from access to funds. Also, in past years 28% of small businesses used their personal home as collateral, but today this practice is no longer allowed. The American Enterprise Institute concluded that that Fed’s reaction to the housing crisis has caused lending standards to become so strict that many banks are having trouble meeting small business needs.

Right now businesses don’t want to become mixed up in the red tape squabble in Washington; they simply need fair access to funding.

“With the economy, it’s been rough this year,” Tanisha Herrera, owner of Hometown Video & Bait N Tackle told her local Oregon newspaper. “It’s been significantly worse than last year. I think it’s a combination of things, the continuous rise of the cost of living, and we had some construction in town this year as well, so everything played into one. Businesses, we’re all struggling out here. We’re hoping that 2013 is a lot luckier.”

Although the Small Business Lending Enhancement Act may need luck, it certainly needs support. Contact your credit union to find out how you can show your support for this important piece of legislation.

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