Credit unions, com­mu­nity banks vie for small busi­nesses’ busi­ness

not-for-proft en­ti­ties would like to lend more to en­trepreneurs; banks say that would be un­fair

Austin American-Statesman - - BUSINESS - By Lay­lan Copelin

Small-busi­ness own­ers strug­gling to find credit in this econ­omy might do a dou­ble take: Credit unions and com­mu­nity banks are fight­ing over them in Congress.

Credit union of­fi­cials want Congress to raise the cap on the small-busi­ness loans they can make — a move that has com­mu­nity bankers cry­ing foul.

The U.S. Se­nate is ex­pected to vote on the mea­sure as part of a larger bill, the Small Busi­ness Lend­ing Fund Act (HR 5297), af­ter law­mak­ers re­turn from the July Fourth break.

The law cur­rently caps busi­ness loans by a credit union at 12.25 per­cent of a credit union’s as­sets. The leg­is­la­tion would in­crease that to 27.5 per­cent.

Win­ter Pros­a­pio, di­rec­tor of pub­lic af­fairs for the Texas Credit Union League, pre­dicted that the share of busi­ness lend­ing by Texas credit unions might dou­ble from 1 per­cent to 2 per­cent if the leg­is­la­tion be­comes law.

“We want to be able to make loans to our mem­bers who are start­ing busi­nesses,” Pros­a­pio said. “We’re not go­ing to take over.”

Stephen Scur­lock, ex­ec­u­tive vice pres­i­dent of the In­de­pen­dent Bankers As­so­ci­a­tion of Texas, com­plained that credit unions are try­ing to carve into one of the last niches left to small banks.

“I don’t care if it’s 1 per­cent or 10 per­cent,” Scur­lock said. “It’s too much.”

Scur­lock said credit unions would have an un­fair ad­van­tage be­cause, as non­profit en­ti­ties, they don’t pay in­come tax and are not reg­u­lated in the same way.

“If they want to be banks, we’d love to have them come join us,” Scur­lock said. Oth­er­wise, he said, “it isn’t a level play­ing field.”

Pros­a­pio pointed to two Austin busi­nesses as ex­am­ples of cus­tomers served by credit unions.

Azar Owalia opened Dream Bak­ery on An­der­son Mill Road in 2005 af­ter re­tir­ing from the Uni­ver­sity of Texas Med­i­cal Branch at Galve­ston.

Con­tin­ued from pre­vi­ous page

“It is my dream to have this bak­ery for a long time,” Owalia said. “But I didn’t have an op­por­tu­nity un­til I re­tired.”

Owalia said she turned to a credit union — not a bank — for help with her $40,000 Small Busi­ness Ad­min­is­tra­tion loan be­cause she had a 20-year re­la­tion­ship with the lend­ing in­sti­tu­tion.

“They helped me a lot,” she said.

Mary Ober and her hus­band moved from Dal­las to Austin to pur­sue her dream of open­ing Au­then­tic­ity Gallery, which sells one-of-a-kind gifts made by artists.

“I was done with cor­po­rate Amer­ica,” she said of her pre­vi­ous ca­reer.

She opened her shop on Congress Av­enue in 2006 with a $225,000 SBA loan through a credit union.

“It felt more re­la­tion­shipori­ented,” she said. “They got what I was try­ing to do.”

Scur­lock said credit unions have moved far be­yond their orig­i­nal mis­sion: “Credit unions were cre­ated to serve con­sumers of mod­est means with a com­mon bond.” For ex­am­ple, many credit unions were or­ga­nized around pro­fes- Au­then­tic­ity Gallery owner Mary Ober – right, with long­time cus­tomer Lau­rann Kanamu on Fri­day – opened her shop in 2006 with a $225,000 SBA loan se­cured through a credit union. sions like teach­ers or fire­fight­ers.

Scur­lock said any­one can join a credit union for a small fee, re­gard­less of whether they have some­thing in com­mon with the over­all mem­ber­ship.

The Texas As­so­ci­a­tion of Busi­ness, the state’s largest busi­ness lobby, has sided with credit unions.

“The need for new cap­i­tal for small em­ploy­ers is ur­gent,” said Bill Ham­mond, as­so­cia- tion pres­i­dent. He said nearly half of all small busi­nesses in the U.S. are strug­gling to find credit and that com­mer­cial lend­ing has fallen 12 per­cent at banks.

Scur­lock coun­tered that Texas-based banks — not count­ing multi­na­tional bank­ing giants — in­creased lend­ing some 13 per­cent in 2009.

“We’ve been lend­ing right through the re­ces­sion,” Scur­lock said.

Thao Nguyen Amer­i­cAn-StAteS­mAn

Azar Owalia opened Dream Bak­ery in Austin in 2005 (‘It is my dream to have this bak­ery for a long time,’ she says) with the help of an SBA loan ob­tained through a credit union. ‘They helped me a lot,’ she says of the credit union, which she chose based on a long busi­ness re­la­tion­ship.

Thao Nguyen

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