By MyBankTracker  Mon Aug 20, 2012

Can Credit Unions Afford Lending to Small Businesses?

Small businesses in need of funding do not have many options. They can appeal to VCs or angel investors, but the processes are long, arduous and hardly guaranteed. And the results can tie you, your company and your idea almost inextricably to those who have given you money.

Fortunately for small-business owners, credit unions have a widening budget gap that they need to fill if they want to continue to afford the National Credit Union Administration’s corporate credit “stabilization” fund, according to an article published on Zero Hedge. To ensure that credit unions have enough income to account for the money they owe to NCUA’s insurance fund, the NCUA has approved of special member business loans or MBLs.

This will allow credit unions to offer loans to small businesses, a space so treacherous that it has even caused big banks to flee. However, with credit unions reporting generally low returns on assets, the government is rolling the dice on allowing them to lend. The idea seems risky, but it could also kickstart a new wave of small-business lending.

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