Massachusetts Credit Unions Report Surge in Small Business Lending

Massachusetts credit unions reported a significant increase in small business lending last year, according to a report from the state's credit union trade association, a trend industry officials attribute to more entrepreneurs turning to credit unions after struggling to secure loans from traditional banks.

The report found that member business lending balances at Massachusetts credit unions grew substantially faster than at the state's community banks over the same period, with credit union officials describing an increasingly common pattern of small business owners who were denied loans by banks turning to credit unions willing to underwrite based on a more complete picture of a business's finances rather than standardized credit models alone.

"Banks have gotten more conservative about small business underwriting since interest rates rose, and credit unions have been willing to actually sit down with a business owner and understand their specific situation instead of just running a formula," said the executive director of the state's credit union trade association. "That's translated directly into loan volume shifting toward us."

The lending growth has been particularly pronounced among newer businesses without several years of financial history, a category that traditional bank underwriting models often treat unfavorably regardless of a business's actual cash flow strength. Several Massachusetts credit unions have expanded dedicated small business lending teams over the past two years specifically to handle the increased demand.

Banking industry representatives pushed back on characterizations that banks have become unwilling to lend to small businesses, noting that overall loan demand and underwriting standards vary significantly by institution and local market conditions. The credit union association said it expects member business lending to continue growing as more Massachusetts entrepreneurs become aware of credit unions as a lending option.