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Credit unions vs. banks: Another David & Goliath challenge?

For some time we’ve believed our nation’s credit unions could be an untapped source of funds for small businesses like boat dealerships. Apparently they do, too. Although it hasn’t made headlines, credit unions are currently conducting a campaign to lift a cap that restricts their ability to lend to small businesses.

Bills have been introduced in the House and Senate by lawmakers who support doubling the business-lending capacity of credit unions. Since increasing small business lending is a major part of the Obama administration’s latest economic offensive, it seems fitting that credit unions point out that raising the cap would instantly increase loan availability at no cost to taxpayers.

As Binyamin Applebaum reported this week in the Washington Post: “Credit unions, historically focused on consumer lending, increasingly are making loans to businesses, too. But the industry’s potential role in fueling an economic recovery, and its opportunity to seize market share from struggling banks, is limited by federal limits on the share of a credit union’s resources that can be devoted to business lending.”

There’s an estimated 86 million members in credit unions today. By law, credit unions focus mostly on consumer lending and cannot make business loans equaling more than 12.25 percent of assets. That limit was largely hypothetical, reported Applebaum, until regulators lifted a number of other limitations in 2003 that increased small business lending from less than $10 billion to more than $35 billion.

Any further growth, which could be helpful to a recovering economy, will be obstructed, as 180 credit unions are already at the federal cap.

Sen. Mark Udall (D-Colo.) has introduced legislation to raise the cap to 25 percent. The Credit Union National Association says that if the cap is raised it could trigger an additional $10 billion in business loans in the first year.

With today’s crying need for small business loans, this proposal makes great sense. You’d think everyone would favor it, right?


Banks are voicing strong opposition, claiming credit unions should remain focused on making loans to consumers. “It’s not needed,” said Ed Yingling, president of the American Bankers Association. “And history has shown that they are not just limited to the classic small business. They make these loans for huge condo projects, for hotels, for strip malls.”

“Should those kinds of institutions be getting taxpayer-subsidized loans?” he asks, referring to credit unions’ tax-exempt status.

Not true, say the credit unions. They claim most of their loans are to small businesses neglected by the banks. One thing’s for sure: Bank lending to small business has been non-existent for some time, and amid increased need.

There is no good reason for not raising the cap on business lending by credit unions, particularly in this economic climate. The White House and small businesses everywhere should be supporting this legislation.


17 comments on “Credit unions vs. banks: Another David & Goliath challenge?


    Great post and a direct point on the biggest proplem today for a Boat Retailer, BANK GREED! These grifters receive a massive bailout and then sit on it without lending. Now they want to block Credit Unions from making loans. After we learned Wall Street and Mortgage Bankers caused the greatest economic crash in 75yrs, I think we can all agree that a Banker has a worse reputation these days than any Used Car Salesman.

  2. Scott

    Why should we lift the cap? So that over-zealous Credit Unions will need to be bailed out too for all the bad small business loans they will make with the raised cap. Credit Unions are federally insured by the NCUA but they don’t have to pay taxes. Doesn’t seem right.

  3. ARCH

    THE BIG MEGA-BANKS ARE RIPOFFS and always have been. There is a reason why they have fancy lobbies with granite countertops and high paid executives. It’s directly correlated to the low amount of interest they pay on your deposits. They make BIG MONEY off your deposits, and only give you a tiny fraction. A total rip.
    CREDIT UNIONS DO A GREAT JOB FOR THEIR CUSTOMERS. They charge much less in fees, have much better interest rates, and the profits go back into the bank and it’s customers.
    I REALLY DON”T THINK THEM LENDING TO SMALL BUSINESS IS GOING TO HELP THAT MUCH. Dealerships don’t need loans, we need customers. We need a lot more help with retail financing than we do on wholesale/business, although there is a need in both areas.

    I wonder how the NMBA is doing with their efforts to get credit unions to get involved in retail marine financing??? ANYBODY KNOW?

  4. ARCH

    IF MOST PEOPLE KNEW WHAT THESE BIG MEGA BANKS DID BEHIND THE SCENES (not only to cause the banking crisis, but the bankroom deals they struck with the guvmint to get out of it), THEY WOULD DROP WHAT THEY WERE DOING RIGHT NOW AND RUSH TO THE BANK TO CLOSE THEIR ACCOUNTS.

    Unbelievable! Yet most people are oblivious to it.

  5. Chris Lyons

    As many of you already know myself and a few marine industry professional across this country tried to start our own Marine Industry Fedral Credit Union last year and due to the lack of support from the industry we could not raise the needed $25K to complete the process. In baseball terms we made it around 3rd base but never made it home. I believe most of the people in our industry truely wanted to own our own financial institution but some believed that our current banking industry would come to our rescue. I don’t think that it’s in the cards for the future of the marine industry.

    Norm is correct about credit unions stepping up to the plate when the tradition banks says “NO” on consumer and business loans. CU’s are still gunshy when talking about the boat business, not becuase of huge past losses but becuase CU’s just don’t understand our industry. Heck, I have even read some CU’s are in the Auto flooring business.

    It’s a fact that CU’s are stronger than ever. Yes, some CU’s had to merge with other CU’s becuse of ther current environment but thet are still lending and yes the ABA is on the war path to destroy the CU industry. Why has the ABA been on the war against the CU industry? Becuase they are lossing business to CU’s.

    How does the average guy get a CU to consider lending to the boating industry? BECOME A MEMBER AND THEN GET ON THE BOARD OF A CU. Every member has one vote when it comes to electing a new board member. GET INVOLVED!!!

    Chris Lyons

  6. Bill Otto


    This is real simple. If Credit Unions want have the the same benefits as Banks, than they will have to Pay Taxes like Banks. Not to mention, be regulated like Banks.

    They can’t have it both ways.

    Bill Otto

  7. capt. skip

    Norm, great post. You hit the nail on the head. Bankers are greedy bleeps’. What was the interst rate banks got during the bailout? We/our money bailed them out and they have the nerve to go after the credit unions.

    Scott you must be a banker. Credit Unions are not profit. The members own the credit union. NO SHAREHOLERS!!!

    ARCH, do you really think the NMBA would get credit unions involved with the boating business. How NMBA members are credit unions? The answer is ZERO. Most of the NMBA members are American Bankers Association members and the other members rely on the traditional banks for income.

    Chris, I was one of the one’s that was in your groups corner when you launched the effort. It’s to bad that the NMMA could not help with your groups effort. I do everything I can do to NOT bank with traditional banks. Credit unions are they way the country should go and when our industry get’s there head out of the sand I will back that effort to.

  8. capt. skip

    Hey ARCH didn’t I tell you that the NMBA is not on our side. The comment from Bill Otto from Lake Effect Financial and VP of the NMBA tells us that the NMBA are on the side of the American Bankers Association and the aggresive tactics against credit unions. Do you really think they are talking to credit unions about the marine industry?

  9. Karen

    The NMBA is on the side of every financial institution that wants to lend funds to consumers and dealers to promote the boating lifestyle. Essentially the problem with credit unions today is that they only want to lend money for 10 years with non-competeiive advances and interest rates. One of the main objectives of the NMBA is to educate the lending community about the benefits of boat lending. Believe it or not we will talk to and meet with any lender that is interested in getting into the boating business. We want to reach out to credit unions, community banks and regional banks to get more players involved. Why not get involved and give us names of institutions you know who show some shred of interest and we will go talk wth them??? We do have plans to market to this segment of the lending community. Why not give us your input and try and help us?

  10. dave boso

    We in the boat business have always been the poor red haired stepchild of the banks, until the guys that build ‘em decide to finance them we will always be.


    The biggest problem with the NMBA is their conflict of interest with the majority of board members and ABRAISIVE Slick Willy dealings of their key leaders. Their former president belongs on a back lot somewhere selling salvage title used cars.

  12. Komrade Karl

    dave b I tend to see things your way but this time I’m not so sure.. As I think about your theory that builders start to get into the finance side I imidiate think of GMAC/Ditech, Ford Motor Credit, Chrysler Credit. This car guys for a long time got away from what they were suppose to do- build better autos, & found that getting into the banking side made them more money per deal than building the autos… then they expanded the finance side & hired banking sharks who took them into the mortgage biz & we know where that got them/us… I think the builders that have deep enough pockets are already doing what you suggest but they also control &/or own interest in the retail side ..Tracker via BassPro & Brunswick via Marinemax…

  13. Mitchell

    Great BLOG and Posts. Credit Unions are tax exempt. So What! Banks are not lending to small business’s. I recently recall the following BANKS bail on the industry, KeyBank, Textron, National City..etc…

    Tell the bankers association to pound salt. Work with Credit Unions, SBA 7A and the SBA 504 programs. Take the decision away from the bankers association that attempted to leave us behind!

  14. dave boso

    Karl mein Komrade; We know all those things, that’s why we can do it better than the car bunch, they were dictated to by their builders. We dealers will have to be involved in setting up the program, wether it be with credit unions or banks we do not want the goverment to be involved. We will want to be represented by a dealer group, but I’m not sure we want the ones that are around now. If I were 30 years younger I would be realy involved , but I ain’t so some of you young bucks get on the ball and let’s get it done, it’s your future, us old guys will tag along and help when we can.l

  15. Captain Andrew

    I agree with Komrad Karl on this one. Norm–this is a very good post. There is one issue though, and I state this as a (non-rhetorical) question: Maybe there needs to be more cash involved and less credit?

    I realize this may lower sales in the short run but it may increase sales in the long run?

  16. Michael Bryant

    It is easy to draw the conclusion that because bankers partially represent the board of the NMBA, there is a movement to keep credit unions out of marine lending. In fact what the NMBA wants is to make sure that any one who desires to be in marine lending is doing it right. There have been countless stories about the number of marine lending brokers and banks lending on boats that have made serious mistakes and as a result are no longer lending. This hurts everyone. The last thing any of us needs are credit unions, not the most experienced lenders to be sure, developing a marine loan portfolio that is going to implode.

  17. Brad Laso

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