Credit union loans on the rise

Small-business borrowing hit $42B in 2011

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Many small businesses depend on credit union business loans. Patti Heins' company, Perfezione Painting, has relied on them at times. Pedro Cordero of Perfezione Painting works at a new Middletown school.TOM BUSHEY/Times Herald-Record

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Published: 2:00 AM - 10/06/12

MIDDLETOWN ? Patti Heins, the president of Perfezione Painting, has had 11 painters and tapers working since May to transform newly installed wall panels into classrooms at Presidential Park, the new elementary school on Roossevelt Avenue.

But, the union painters don't come cheap, at a prevailing wage of more than $50 per hour. The only way Heins can meet payroll is with short-term loans from Mid-Hudson Valley Federal Credit Union. The mini-bridge loans fund her employees' weekly paychecks until general contractors pay her.

Heins said Mid-Hudson Valley has also extended her a Small Business Administration loan, a line of credit, a car loan and a business credit card for Perfezione, which surpassed $2 million in sales this year.

Commercial lending to small businesses like Heins' are fueling growth at Mid-Hudson Valley, said CEO Wayne Winkler.

At the end of 2011, commercial loans at the nonprofit were up 16 percent from a year before. They're tracking to rise 14 percent this year.

Mid-Hudson Valley is in step with national trends. Nationally, credit union business loans have jumped from about $28 billion at the end of 2006 to $42 billion at the end of last year, according to financial services firm SNL.

Higher cap would boost loans

Winkler, whose credit union in nearing its commercial lending limit, is in favor of a federal law that would more than double the cap on credit union business lending, to 27.5 percent of assets from 12.25 percent.

Mid-Hudson Valley's commercial loan portfolio is about $87 million, according to financial statements. If the credit union's assets stay the same, it'll be limited to just $7 million more in business loans under current rules.

"We've never been this close to the cap," Winkler said.

Another local credit union, Hudson Valley Federal Credit Union, has a commercial loan portfolio of about $250 million, and, with $3.6 billion in assets, is more than halfway to its cap, according to financial documents.

Hudson Valley has seen more commercial lending as the economy has improved, and as its borrowers become aware that it provides business services, said Lisa Morris, director of marketing.

Traditional banks competing

Many local bankers do not support lifting the cap, noting that credit unions have an advantage over banks because they do not pay some taxes. They're less than thrilled about the new crop of competitors.

Glenn Sutherland, the CEO of Catskill Hudson Bank, said the bank has lost business because of aggressive credit union lending. Credit unions can offer lower interest rates because of their lower cost structure, he said.

"If they want to play by our rules and create a level playing field, more power to them," Sutherland said.

Patrick Keefe, a spokesman for the Credit Union National Association, said there's no correlation between the financial cooperatives' tax status and business loans. Any money earned from commercial lending is funneled back to members in the form of lower or no fees, lower interest rates and higher returns on savings.

Winkler doubts the bill doubling the cap will be approved this year, but thinks it has a good chance of becoming law next year.

He added that he'll "never turn the faucet off," and would do loan participations with other lenders if he hits the limit.

jdinapoli@th-record.com

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