CHARLESTON, W.Va. -- When Brad Nichols started purchasing real estate three years ago, he stopped at Star USA Federal Credit Union in Charleston after first visiting commercial lending departments at several area banks.
Star USA, Nichols said, offered a lower interest rate, better terms and no application fees. Nichols took out a $250,000 loan and purchased rental properties in Charleston and Dunbar.
Nichols figures he's saving several thousand dollars a year in interest payments by securing his loan through a credit union.
"With that money, I've been able to replace windows, doors, carpet and air-conditioners," Nichols said. "I've also been able to hire a part-time maintenance person."
As U.S. lawmakers battle over a major jobs bill, credit unions are urging passage of a provision in the legislation that would allow them to make more loans to small business owners such as Nichols.
The Senate bill amendment would more than double the cap -- from 12.25 percent of total assets to 27.5 percent -- on business lending for some credit unions.
The 12.25 percent cap hasn't changed since it was first adopted in 1998.
"If we hit the cap, we literally have to stop making small business loans, even if we have the capital available," said Dan Smithson, president of Star USA. "It's disturbing to us that we've had this cap placed on us. There's no real practical reason for it."
The U.S. banking industry supports keeping the lower cap.
Banking groups say credit unions already have an unfair advantage because they're tax exempt. The American Bankers Association recently issued an "Action Alert" asking members to contact their senators and urge them to vote against raising the cap.
Joe Ellison, president of the West Virginia Bankers Association, said increasing the business-lending cap for credit unions would hurt small community banks.
"The primary beneficiaries of expanded business lending authority are the large, aggressive, growth-oriented credit unions that have abandoned their mission of serving people of small means," Ellison said. "The amendment adds to an already unlevel playing field by increasing the ability of tax-advantaged credit unions to take small business lending away from banks -- the bread and butter of community banks across the country."
Bank executives also say the higher cap could lead to irresponsible lending.
"Increasing the business lending cap and expanding these credit unions' already broad authority would substantially increase the risk exposure of credit unions and result in credit unions straying further from their traditional mission," Ellison said.