Treasury Report Shows Banks Outpacing Credit Unions in Making Loans through Small Business Program

Community banks participating in the Treasury Department’s $1.45 billion State Small Business Credit Initiative (SSBCI), which provides direct funding to states for programs that expand access to credit for small businesses, are vastly outpacing credit unions in making loans through the program.

The SSBCI distributes federal funds to states for programs that partner with private lenders to expand small-business credit. States must demonstrate a minimum “bang for the buck” of $10 in new private lending for every $1 in federal funding.

According to the report, community banks (i.e., those with less than $10 billion in assets) are the most active participants in the SSBCI program. Community banks account for 57 percent of jobs created or saved through the program, 60 percent of the total invested or lent and 42 percent of the total number of loans. Meanwhile, credit unions accounted for less than 1 percent of jobs created or retained and 1 percent each of total loans and total lent or investment.

Fourteen of the 15 most active SSBCI lenders were banks, including seven community banks. No credit unions made the list of most active lenders.

The report noted that credit unions made 37 percent of their SSBCI loans in low- and moderate-income (LMI) areas. However, only 15 percent of their loans by dollar amount were in LMI areas. The report concluded "that credit unions tend to make much smaller loans in LMI areas than they do in non-LMI areas."

On the other hand, 31 percent of community banks’ loan activity and loan dollar volume occurred in LMI areas.

Read the report.