Small businesses are vital to Main Street and our nation's economic growth. According to a recent Small Business Administration report, small businesses outperformed large firms in job creation by 75 percent from 1992 through 2010.
Consider the story of John and Suzanne Hermann, owners of the Bagel Factory in San Antonio, Texas. After being rejected by several financial institutions, the Hermanns turned to Randolph Brooks Federal Credit Union (RBFCU) and were approved for a loan to start their business. Ms. Hermann said they contacted at least 15 different financial institutions. Most refused to even meet with them. Because of her husband's status as a military veteran, they were, however, able to qualify for a Patriot Express Loan through RBFCU and have built a thriving business that now employs 14 people.
Seven years ago, two wineries in the Finger Lakes area came to Visions Federal Credit Union. They said that the banks that held their business loans had sold them to a venture capital company in New York City. The venture capital company subsequently closed down their lines of credit and was pressuring them to pay off the loans. Visions helped the wineries by providing financing for their wine-making operations. Today, Visions has two of the largest Finger Lakes wineries and three smaller wineries as members. Visions' participation in this agricultural-type lending helped the wineries create hundreds of jobs.
The list of small-business success stories fueled by credit union loans is extensive. They are shining examples of what can be accomplished when small businesses and credit unions -- not-for-profit, member-owned financial institutions -- work together. But while credit unions would like to do more to help their small-business members, they are hampered by an arbitrary cap on the amount of business lending they are allowed to do.
The Small Business Lending Enhancement Act (S. 2231/H.R. 1418) is bipartisan legislation that would help small businesses gain access to much-needed credit by raising the cap on member business lending and allowing credit unions to provide more loans to their small-business members. Restricting the amount of business lending credit unions can provide undermines job creation. The Treasury Department and the National Credit Union Administration have signed off on this common-sense measure, which could spur more than $13 billion in new lending and create more than 140,000 new jobs in the first year alone -- at no cost to taxpayers.
Another dimension of this issue is the size of credit union business loans. In a recent study, credit unions reported that 44 percent of their portfolios were made up of loans of less than $100,000; loans between $100,000 and $250,000 made up 20 percent of their portfolios. These are truly loans to small businesses -- small businesses that can and will create the jobs that our country so desperately needs to regain economic strength and drive future prosperity.
Even as recent headlines detail yet one more investment debacle at a behemoth Wall Street bank, small businesses and credit unions continue to carry the water for America's communities and ultimately, our entire nation's economic well-being.
What better way to recognize small businesses than by giving them an opportunity to grow? Raising this arbitrary lending cap by passing S.2331/H.R. 1418 is a vote in favor of Main Street small businesses and the average American taxpayer. It's a vote for the American way of life.
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