If You Start Me Up, I’ll Never Stop: Colorado Small Business Lending Reform

Small businesses in Colorado take notice. Mark Udall, the U.S. Senator from Colorado, has been working to get a bipartisan bill passed through Congress which would increase access to capital for small businesses by lifting the cap on credit union lending.

Historically, credit unions have not been able to provide the credit and lending opportunities that both the large and community banks have a lock on. Many of these same large banks have received $30 billion of taxpayer bailout money, yet the lending environment for Colorado small businesses remains stagnant, limiting job growth. Estimates are that Senator Udall’s bill, dubbed the Small Business Lending Enhancement Act, could create as many as 100,000 jobs for Colorado.

Don’t Fence Me In

Yet, a bill that seems to be wreathed in common sense will often find it a difficult road in Congress, especially when powerful interest groups are involved. Senator Udall’s Bill calls for raising the current cap on the portion of a credit union’s assets that can be lent to small businesses from 12.25% to 27.5%. Coincidentally, the current lower cap was set in 1998 by the very large and influential banking lobby. Their argument against the Bill is that it could lead to irresponsible lending, resulting in defaults and taxpayer liability. I guess the large banking industry should know all about that if one looks into their recent history. Meanwhile, credit unions as a whole have maintained very good lending records. The Senator even sought help from the U.S. Treasury to include safeguards to help prevent lending abuses.

Credit Unions must meet the following criteria to use the new lending cap:

  • Be well capitalized;
  • Have a five-year track record of providing small business loans
  • Pass muster with an industry-sponsored oversight group
  • Only be able to loan less-than-one-third of their 27.5% capacity each year

By the People, For the People

This is not a political diatribe; it’s a pro Colorado business and entrepreneur diatribe. Udall’s proposal has bipartisan support; the two lead sponsors are Rep. Ed Royce(R-Calif.) and Rep. Carolyn McCarthy (D-N.Y.) In the Senate, conservative Republican Senator Rand Paul has expressed his support for the measure. If the Bill is approved, Colorado startups could see these results:

  • Estimates that in the first year it could provide $10-12 billion in additional loans to small businesses
  • The average credit union business loan is $219,000, and that would mean Senator Udall’s bill would help almost 55,000 businesses get started.

It’s time to get business moving forward in Colorado. If a true shift in the economy and unemployment in our state is to happen, it will only happen on the backs of the entrepreneurs and business people forming businesses, because this is where the majority of jobs are created. Business formation can only happen within a well rounded and responsible lending environment. It’s time for the big banking industry to stop being reactive and looking out for its own interests, and start working for Colorado small business.

Copyright © 2011 Hasan, LLC. All rights reserved.

“Credit Card” under CC license by 401k