Business lending at credit unions

Credit unions have a long history of making loans to businesses. In 1908, Alphonse Dejardins, one of the early credit union pioneers in North America, said:

“There is . . . a very interesting class of small merchants, of humble industrialists, of modest entrepreneurs whose financial status does not permit them to have access to the large banks, where their well enough known fellow businessmen go to stock up in order to enjoy the benefit of a checking account. To all of them as well, the cooperative offers financial assistance that is most precious.”[1]

By the time the Federal credit union act was passed in 1934, America’s first credit union, St. Mary’s Bank, was already providing credit to lumber yards, retail stores, and a neighborhood business neglected by other lenders.[2]

In September 2023, the average business loan on the books at a credit unions in the United States was $623,264.[3] Unfortunately, banks do not report data in the same way as credit unions, so it’s impossible to know the average size of their business loans, but it’s notable that when reporting data, banks classify anything under $1,000,000 as small. This supports the idea that credit unions meet a marketplace demand that banks aren’t willing to fill. 

In 2001, a Utah legislator stated that a relative of his, working in the banking sector, “wouldn’t get out of bed for a loan less than $10 million.” Imagine how bankers feel about a $623,264 business loan in 2024.

Credit unions fulfill a critical business need in the marketplace.

Business lending cap

Credit unions generally face limits on the amount of business lending they are allowed to conduct:

  • Federal limits:
    • Only 12.25% of a credit union’s assets can be in loans to small businesses.[4]
    • The aggregate amount of a business loan that can be made to one member or group of associated members at 15% of the credit union’s net worth or $100,000, whichever is greater.
    • To start business lending, a credit union must have significant experience on staff to manage the program. It’s not enough for existing staff to learn about and study it—at the outset of the program the staff must have experience. This usually requires acquiring the expertise.
  • Utah state-chartered credit unions have two meaningful limits:[5]
    • Individual loans: starting in 1999 could not exceed $250,000. The number is indexed to the consumer price index, and in 2023 sits at $376,450.
    • Aggregate limit: cannot lend more than 1.25 times the credit union’s undivided earnings and actual reserves other than regular reserves.

For practical purposes, the aggregate limit for Utah state-chartered credit unions makes a business lending program difficult to implement. The aggregate cap means that income from the program will be limited—probably not enough to justify creation of a business lending program. For this reason, many Utah credit unions that want to engage in business lending have switched to a federal charter. Generally, the Federal charter allows credit unions to make more and larger business loans than the Utah state charter.

A notable benefit of the Federal charter is that Federal credit unions can bypass the limit by obtaining and retaining a low-income designation. However, if the designation is lost, the cap takes effect, again.

Also, notably, in 2018, President Trump signed S. 2155, Economic Growth, Regulatory Relief, and Consumer Protection Act which excluded one-to-four family dwellings that are not for the primary residence of a member from the member business lending cap.

Origination of the cap

The business lending cap is a recent development for credit unions, who for most of their existence were not subject to any business lending restrictions. In 1998, when the Credit Union Membership Access Act was passed in Congress, the 12.25% cap was added. It was, in the messy process of lawmaking, a compromise on the part of credit unions to ensure that millions of Americans did not lose access to their credit unions.[6]

In Utah, in 1999, the Utah State legislature imposed the limits on state-chartered credit unions.[7]

Prior to passage of these laws, there were no limits on the business lending for any credit unions.


[1] L’Avenir National (Manchester, N.H.), Vol. XXI, No 67, 28 November 1908, P. 4-5.

[2] Condition of Small Business and Commercial Real Estate Lending in Local Markets, Joint Hearing Before the Committee on Financial Services and the Committee on Small Business, US House of Representatives, 111th Congress, Second Session, February 26, 2010, US Government Printing Office. Available here:

[3] NCUA Call Report data


[5] Utah state code, 7-9-20(c)(i):


[7] SB 237, passed in 1999 by the Utah state legislature: