The Main Street Alliance Releases an Agenda for Small Businesses & Local Economies

May 25, 2012 at 3:56 pm 1 comment

The Main Street Alliance released an agenda this week that outlines a range of policy prescriptions to support small businesses and local economies. The agenda is organized into eight policy arenas: the economy, the financial sector, the health care marketplace, the tax system, the regulatory system, the workplace, the immigration system, and the electoral system. Based on surveys of small businesses, this agenda also debunks some of the myths around small businesses on issues like taxes and regulation, and provides recommendations tailored to the specific needs of small businesses.

The set of recommendations on the financial sector include some very useful recommendations for increasing access to capital. One is to support cities and towns to move their deposits to community banks, which would increase the ability of those smaller banks to extend their small business lending. In exchange, the municipality can set expectations and benchmarks for certain community benefits that the banks would provide.

It would be useful to extend this recommendation to include credit unions. Although credit unions are able to accept public deposits, according to National Credit Union Association regulations, most states do not allow it (North Carolina included, see the map below).

The states shaded red allow municipal deposits to some degree. The blue states prohibit municipalities from depositing with credit unions. Source: Callahan & Associates. (

Changing the state regulations prohibiting credit unions from accepting municipal deposits would be a huge boost to the capability of credit unions to do small business lending. These deposits would enhance the portfolios of credit unions by increasing their net worth, allowing them to increase their lending activity and ultimately reach more small businesses. This would be particularly useful to Community Development Credit Unions, which serve those communities typically left out of the financial mainstream.

Combined with the agenda’s other recommendation to lift credit unions’ lending caps, this would be a big step toward increasing access to capital for small businesses in the state.

Entry filed under: Banks, Credit Unions, Economic Development, Small Business. Tags: , , , , .

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