WASHINGTON—While credit unions remain an important source of credit for small businesses, a number of regulatory obstacles create barriers to growth, suggests
NAFCU's latest Economic & CU Monitor indicates.
NAFCU noted it has long advocated for reforms to member business loans, both through legislation and regulatory relief from the NCUA. Following the passage of S. 2155 – which excluded from the cap all MBLs fully secured by a one-to-four family residential property that is not a member's primary residence – 35% of respondents said this exclusion allowed their credit union to originate more of these types of loans, according to the Monitor survey.
Since 2017, the amount of credit unions that reported being a Small Business Administration (SBA) preferred lender grew 20%, the Monitor revealed. Some of the major barriers for credit unions seeking to become SBA preferred lenders reported by respondents include staffing limitations and limited experience required to effectively manage and maintain an SBA loan portfolio, as well as cumbersome examination requirements.
Sentiment Index
The new edition of the Monitor also showed the Credit Union Sentiment Index (CUSI) declined modestly in February after a three consecutive months of increases. The CUSI an index based on NAFCU member responses to eight questions on growth and earnings outlook, lending conditions and regulatory burden.
The sharpest decrease was in the earnings score, which now sits below the 12-month average. Although the growth score also fell, respondents were optimistic because of loan demand and the economy. The lending score was the only increase this month due to positive sentiment around applicant quality, NAFCU explained.