The report, "The Increasing Importance of Credit Unions in Small Business Lending," is authored by James A. Wilcox of the Haas School of Business at the University of California-Berkeley and was released by the SBA's Office of Advocacy.

 

"Credit unions devoted increasingly important shares of their assets to SBLs since the 1980s.  Strikingly, over the same period, banks did the opposite," wrote Wilcox in the report.  "Small business loans as a share of credit union assets rose gently during the 1990s and increased much more rapidly through 2010.  In contrast, banks devoted a fairly steady share of their assets to SBLs until the 2000s, when the share fell substantially."

 

In another view, the report maintained, "SBLs at banks slowed somewhat during and after the 2001 recession.  Moreover, during much of the 2000s, SBLs at banks grew at lackluster rates, especially compared with the 1990s.  During and after the recession of 2007-2009, SLBs at banks actually shrank, and considerably so in 2010."

 

Grew During Past Two Decades, While

 

"In contrast, SBLs at credit unions grew faster than at banks from 1995 to 2010, with an average annual growth rate of 16% compared with 3% at banks.  Furthermore, the growth of small business loans at credit unions during and after the 2001 recession continued its double-digit pace, exceeding 20% annually for several years into the 2000s."

 

The report said growth rates of SBLs at credit unions "tended to be highest when the growth rates at banks were at historically low levels.  Of course, during the crisis that enveloped the U.S. credit markets after 2007, growth rates of SBLs declined at both credit unions and banks.  While growth rates of SBLs at credit unions slowed during the financial crisis and ensuing slow recovery, those growth rates remained remarkedly positive, far above those of banks, and were actually higher than those of banks at almost all points during this extended period."

 

Part of the differential resulted in the fact that the business loan market was new to some credit unions.  "Nonetheless, even during the financial crisis, the gap between annual growth rates of small business loans at credit unions and at banks continued at well over 10%," Wilcox said.

 

Over shorter periods, if the supply of business loans at banks were disrupted, "the availability of SBLs at credit unions might well be of importance to small businesses," said the report.

 

The report's conclusion: "If credit unions can appreciably and increasingly offset fluctuations in banks' small business loans, potential small business borrowers should be made aware of this alternative source of loans."

 

It also noted, "credit unions perhaps should be included as alternative suppliers of business loans when regulators assess the effects on market concentration and competition of bank mergers.  In addition, regulators might consider the extent to which credit unions could otherwise offset fluctuations in business loans at banks when setting ceilings on business loans at credit unions.  And small businesses might face better loan terms and availability if more credit unions recognized more opportunities for more SBLs."

 

The Credit Union National Association (CUNA), state-level associations, and credit unions are pressing Congress to pass bills that would enable credit unions to make more member business loans (MBLs) by lifting their MBL cap to 27.5% of assets from the current 12.25% of assets.  CUNA asserts that doing so would enable credit unions to infuse $13 billion into the economy in small business loans and help create 140,000 jobs the first year -- without costing taxpayers.