When Maryland dentist Steven Rattner sought a lender to refinance his commercial property, he was attracted to the National Institutes of Health Federal Credit Union, which offered lower rates than many other institutions, including banks.

He heard he would be eligible for a business loan from the Rockville credit union — which bills itself as the nation’s largest serving the biomedical and health care industries — at a dental society meeting.

The “great rate initially caught my eye,” Rattner, who opened an office in College Park in 1986 and another in Gaithersburg in 2000, said in a statement. “The application was quick and straightforward, plus [credit union] representatives had an impressive one-on-one approach that helped me understand the process while also saving me valuable time.”

While a federal program that was designed to boost small-business lending capital at banks provided only $4 billion of a possible $30 billion, more credit unions, which have long focused on consumer lending, have been offering business loans, particularly serving an often neglected small-business segment. Seven institutions in Maryland, led by Eagle Bancorp of Bethesda with an investment of $56.6 million and Tri-County Financial Corp. of Waldorf with $20 million, took advantage of the federal small-business lending program that ended last month, according to U.S. Treasury Department figures.

Some 30 percent of credit unions provided members the opportunity to obtain business loans in June, up from 25 percent in 2007, according to statistics from the Credit Union National Association, a trade group. The number of commercial lending applications processed by credit unions is rising faster than those for car loans and home mortgages.

The business loan program at the NIH credit union began about a year ago. The credit union has about $14 million in business loan volume, with most loans ranging from $250,000 to $500,000, said CEO Juli Anne Callis.

“There is a need to be filled,” she said. “While rates are at historic lows, many lenders are still constricting access to credit and making it difficult for many small businesses to grow.”

Business executives need not be a credit union member initially to apply, and can wait until seeing if the loan application before joining, Callis said.

“We’ve had more loans from existing members so far,” she said. “Our niche is not the large-business loans that banks service, but the humble small-business loans.”

Rates are as good, if not better, than those offered by most banks and the loans come with either no or modest fees, Callis said.

The NIH credit union recently opened a renovated office in a wing of Sibley Memorial Hospital in Washington, D.C., and has many physicians and other medical personnel among its 43,672 members. The credit union, which has 10 branches, saw assets rise by about $5 million in the past year to $538.1 million.

There are 112 credit unions in Maryland, with 1.8 million members and assets totaling $17.99 billion, according to the trade group. Nationally, there are 7,437 credit unions with 91.5 million members and assets of $916.71 billion.

Legislation would raise lending caps

The credit union trade group is campaigning for federal legislation that would raise the limit credit unions can have in business loans from the 12.25 percent of assets that Congress set in 1998 to 27.5 percent. Banking groups oppose those bills.

Albert C. Kelly Jr., chairman-elect of the American Bankers Association, testified last week before the House Subcommittee on Financial Institutions and Consumer Credit that the legislation would effectively turn credit unions, which have federal tax advantages as nonprofits, into “tax-exempt banks.” Business loans of less than $50,000 do not count against the current cap of 12.25 percent, he said.

“Instead of trying to broaden tax-advantaged lending, increasing the deficit in the process, credit unions that seek to expand business lending opportunities can reach out with credit in their communities by converting to a mutual savings bank charter,” Kelly said. “This charter provides the flexibility credit unions desire and would put these credit unions on equal footing with banks with respect to taxes and regulatory oversight.”

If the legislation passes, credit unions could lend an additional $13 billion to small businesses in the first year, Bill Cheney, president and CEO of the credit union group, wrote in a recent letter to federal officials. There are about 175 credit unions at the cap, with 180 more quickly approaching it, he said.

While credit union business lending is growing, commercial banks still have more than 10 times the volume of such loans, with some $1.2 trillion worth as of June, according to figures from the Federal Deposit Insurance Corp.

kshay@gazette.net