Credit Union Small Business Lending Soars

Noah Yosif, NAFCU Economist

The Bottom Line column featured in the July-August issue of The NAFCU Journal documented the remarkable growth in startup firms since COVID. During the first five months of 2023, annualized applications to form new businesses were up 49% over 2019. For credit unions, this is a good thing. A review of data from the Small Business Administration (SBA) illustrates the important and growing role credit unions play in providing loans during the recent entrepreneurial boom. These government-guaranteed loans provide small businesses easy access to capital under reduced risk premiums, and the member-focused mission of credit unions makes the industry a perfect partner for such enterprises.

Over the past decade, credit unions saw a 69% increase in SBA-guaranteed small business lending, compared to 26% among commercial banks. The gap between credit union and bank SBA lending began to grow in 2020, but has persisted in subsequent years, tracking with the elevated levels of startup activity over that period. A recent report from the Federal Reserve1 finds that among small businesses with at least one paid employee, 8% use a credit union as their primary financial services provider. It is also worth noting that usage rates are higher for firms with fewer than 10 employees and for those that were formed within the past five years.

This growth also reflects structural changes within the financial services ecosystem, which have left credit unions as the only viable partners for small businesses. One such change is the rise of banking deserts created by an increase in bank branch closures. Counties with over 50 bank branch closures saw credit unions underwrite nearly twice the amount of SBA loans than those counties with fewer than 50 branch closures. This dynamic has grown more important since the onset of COVID, as banks shuttered branches at a more rapid pace. One report finds that “the banking industry doubled the branch closure rate after the coronavirus pandemic” hit the U.S.2

Credit unions continue to face regulatory limitations on commercial lending activities, but at the same time, their budding share of SBA loans suggests that the industry remains more than capable of serving small businesses. By maintaining a strict member-oriented mission and diligently serving their local communities, credit unions are poised to remain a strong partner for entrepreneurs and small businesses, as well as the broader economy at-large.


  1. Board of Governors of the Federal Reserve System (2022). Report to Congress on the Availability of Credit to Small Businesses.
    Washington: Board of Governors,
  2. National Community Reinvestment Coalition (2022). How Banks Closed their Doors as the US Economy Reopened.