Credit Unions’ Rising Share of Small Business Loans

Abstract

Credit unions are increasing their share of small business loans. Over the period of 2010-2014, business loans from credit unions increased by 39.2 percent while their assets increased by 22.7 percent. Community banks reduced their business lending by 5.6 percent over the same period. A mixed cross- section/time-series (panel) model is developed to identify significant determinants of credit union business loans. Business loans as a proportion of assets are a function of asset percentages of liquidity, mortgage loans, and consumer loans, as well as the ratio of total loans to share deposits and a time trend. Average deposits per competitor has a positive, statistically significant coefficient. In markets where their competitors are larger, credit unions are supplying more credit to business.