Schumer Announces Plan To Dramatically Increase Lending To RFL Small Businesses In Coming Year; Will Lift Lending Cap On Credit Unions To Provide Local Biz With Millions In Capital And Create Hundreds Of Local Jobs

Press Release

Move Will Be a Major Boost to State's Largest Credit Union - Located Right Here In Rochester; ESL Is In The Process of Building Headquarters In Downtown Rochester, Bringing 275 Construction Jobs and 300 Permanent Jobs

Senator Proposes Fixing Little-Known 1998 Law By Raising the Statutory Cap On Small Business Loans Made By Credit Unions

Right Now, Credit Unions Can Only Lend Up to 12.25% of Total Assets to Small Businesses; Credit Unions Say $10B In Additional Loans Could Be Made In First Year If Cap Is Raised to 25%

With the ongoing economic crisis choking off the flow of credit to Rochester Finger Lakes small businesses, U.S. Senator Charles E. Schumer today announced a new proposal that would allow credit unions to jumpstart lending to RFL businesses by $10 billion in the coming year. Schumer has introduced legislation that would eliminate a statutory limit on the volume of business loans that can be made by the country's 8,000 credit unions. Prior to 1998, no cap on small business lending existed. But under a law passed in 1998, credit unions can only make business loans up to 12.25 percent of their total assets. The bill Schumer has introduced would raise the cap to 25 percent. The Credit Union National Association (CUNA) estimates that credit unions will loan as much as $10 billion to small businesses in the first year after the cap is lifted, providing a necessary lifeline to businesses across the Region.

The Rochester Finger Lakes Region currently has 10 credit unions that lend to businesses, and scores of others that just lend to individuals. Schumer said that not only will the cap increase encourage more lending from the credit unions that currently lend to businesses, but it will encourage more credit unions to begin lending to businesses. This is because a credit union that does not consider it worthwhile to set up the infrastructure business lending requires if they are capped at 12.25 percent may consider it worthwhile if the cap is 25 percent.

"In 2010, our focus must be on increasing the lending to all of the small businesses in the Rochester Finger Lakes area, which are the lifeblood of our economy." Schumer said. "The ongoing financial crisis has significantly reduced the availability of credit threatening Rochester Finger Lakes area small businesses and the larger economy. That is why I have introduced this bill to increase the accessibility of credit to small businesses. The legislation would specifically give a boost to Rochester's credit unions, such as ESL Federal Credit Union as it expands to its new headquarters downtown."

Schumer today said that with big banks pulling credit lines to Rochester small businesses amid this crisis, credit unions are well-positioned to come to the rescue. He said his bill in particular will be a major boost to credit unions such as the ESL Federal Credit Union (ESL), which is located in Rochester and employs approximately 600 people. ESL is currently constructing its new headquarters at 225 Chestnut Street in downtown Rochester which will create 275 construction jobs and 300 permanent jobs. ESL is the state's largest credit union, and helping it improve its business would be good for Rochester. The same is true for the regions other credit unions.

According to data provided by the Small Business Committee, the volume of loans guaranteed by the Small Business Administration is down more than 60 percent compared to this time last year. In the current environment, it is not only hard for small businesses to obtain initial credit, but it is also proving very difficult to maintain lines of credit they already have. Many businesses are now relying heavily on credit cards, which often have unfavorable terms. According to a survey performed last year by the National Small Business Association, 70 percent of small business owners say they have seen the terms of the credit cards worsen.

With so many large banks in bad shape, credit unions are becoming increasingly important, especially with regard to small businesses that need relatively small lines of credit. Due in large part to the fact that they are not-for-profit, membership-based institutions, credit unions have not been exposed to the same losses that major banks have seen in their lending and investment operations. Credit unions also have a long track record of scrutinizing borrowers, and have low delinquencies as a result. Because deposits have been on the rise as people move their savings from the stock market to savings accounts, they have cash on hand to loan to small businesses.

There are over 8,000 credit unions in the United States. With online banking, credit unions are available to just about any small business anywhere. And with an average loan size of about $200,000, credit unions are suited to small business lending. An estimated 27 percent of credit unions currently make small business loans.

The regulator for these institutions already has a policy in place that gives them the ability to provide oversight over their lending mix. Schumer's bill will also require a semi-annual report to be provided to Congress twice a year on small business lending and loan delinquencies so that Congress can monitor the impact of the cap elimination.

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