Few Americans realize that federal law limits credit unions from lending more than 12.25% of their total assets to small businesses.

This Member Business Lending (MBL) cap was imposed in 1998 – an era when smartphones didn’t exist and the needs of modern entrepreneurs weren’t on Congress’s radar. Today, that arbitrary cap persists as a relic of the past, one that industry experts have rightly criticized as a barrier to economic growth and affordable financing for small businesses. In practice, it means credit unions often hit a ceiling that prevents them from extending additional loans to local startups and Main Street shops, even when those businesses are creditworthy and in need of capital. This isn’t about safety or soundness – there was never a solid economic rationale for the 12.25% cap. It’s an artificial number born of politics, and its continued existence is holding back community businesses and job creation in towns across America.

The lending cap’s most tragic impact falls on our veteran entrepreneurs – the very men and women who served our country and now seek to build businesses in civilian life. Veterans bring proven resilience, leadership, and discipline from their military service, making them ideal small business owners. Yet when they turn to their local credit union for an affordable business loan, they often find the bank vault effectively locked. Big banks frequently decline or avoid small loans in military communities (indeed, many big banks retreat from rural and military areas altogether), so veterans rely on credit unions.

But credit unions’ hands are tied by an “outdated relic” of a cap that “stifles entrepreneurship, limits economic growth, and denies veterans and Main Street job creators’ access to affordable credit.”

The result? Veteran-owned small businesses struggle to access the capital they need, despite their proven service and sound business ideas.

Data confirms that veteran entrepreneurs face disproportionate barriers in financing. A joint SBA-Federal Reserve report found that veterans apply for financing as much as non-veterans yet are denied loans at a much higher rate than their non-veteran peers. They often end up with only a fraction of the credit they seek. In fact, loan approval rates for veteran-owned businesses are around 10% lower than for other firms, leaving a huge financing gap. Many veterans are forced to rely on personal savings or credit cards to fund their businesses. This is unacceptable – those who wore our nation’s uniform shouldn’t have to fight another battle at home just to get a fair shot at a business loan. Yet the federal cap is effectively disproportionately harming those who served by cutting off the most affordable credit option available.

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If this sounds like a commonsense issue, Americans agree – overwhelmingly. In a recent nationwide poll, 62% of voters supported removing the credit union business lending cap, with only 20% opposed. That is a landslide of public opinion and notably support crosses party lines. Republicans backed lifting the cap 71% to 15% – nearly five to one in favor. Independents and Democrats also showed strong majority support. In today’s polarized climate, it’s almost unheard of to see a 41-point margin of agreement on any issue. But on letting credit unions lend more to small businesses, Americans speak with one voice: yes, please.

Lawmakers are taking notice of this mandate. As one Senate aide put it, “Credit unions are trusted partners in our communities, and lifting the cap could unleash significant economic opportunity”. Voters recognize that credit unions – as member-owned nonprofits – often offer lower interest rates and more flexible terms than big banks. These community lenders have a mission to serve the little guy, not maximize profits. It’s no wonder the public sees letting credit unions lend freely as a no-brainer that will help entrepreneurs. This is not a partisan issue out in the real world; it’s about economic empowerment and fairness.

Repealing the cap would have real economic payoff. Right now, the cap is artificially curtailing a lifeline for local businesses that struggle to secure capital from traditional banks. Remove the cap, and credit unions across the country stand ready to pour millions in new loans into America’s small businesses, fueling growth on Main Streets from coast to coast. Consider our veteran-owned businesses: There are roughly 1.76 million of them nationwide, employing over 5 million Americans and generating nearly $1 trillion in revenue. These veteran-run companies are an economic powerhouse – and they could be even stronger with improved access to credit. When veterans succeed as business owners, they hire fellow Americans, innovate in their industries, and build community wealth. Every dollar we empower a veteran entrepreneur to borrow and invest comes back many times over in jobs and economic activity.

Critics of lifting the cap have no credible argument beyond protecting certain entrenched interests. Credit union advocates have long noted that the cap “doesn’t reflect market realities or member needs”, and they’re right. Eliminating this cap costs taxpayers nothing – not one dime – because credit union loans are private capital, not government spending. It also poses no new risk; regulators will still ensure safe and sound lending practices. In fact, Congress is already considering bipartisan bills like the Veterans Member Business Loan Act (VMBLA) as a prudent first step, which would exempt loans to veteran-owned businesses from the cap. Lawmakers on both sides recognize that freeing up credit for veterans can be done “without compromising safety and soundness”. But while a veteran-specific exemption would be welcome, we shouldn’t stop there. Our veterans certainly deserve the help, but so do all hard-working small business owners who are currently shut out by this outdated law. Full repeal of the MBL cap is the ultimate solution – anything less is a half-measure when our recovering economy needs a knockout punch of growth.

As the Chief Advocacy Officer of the Defense Credit Union Council (DCUC), I have seen firsthand the difference that access to capital can make in the lives of veterans and their families. DCUC and credit unions nationwide have been urging Congress to modernize these outdated lending laws for over a decade. We’ve sent letters, testified in hearings, and worked with coalitions to push for change. Now is the time to finally act. With broad public backing and bipartisan momentum building, Congress must fully repeal the federal credit union business lending cap. Not raise it, not carve it full of exemptions – repeal it outright. Doing so will immediately unlock affordable financing for thousands of veteran-owned startups and mom-and-pop shops, fueling entrepreneurship and job creation when America needs it most.

To every reader who supports our veterans and local businesses: your voice matters in this fight. I urge you to contact your U.S. Representative and Senators and tell them to support legislation eliminating the credit union member business lending cap. Remind them that this issue is not about left or right, but about right and wrong – and the American people overwhelmingly know the right answer. Veterans who served our country deserve our support in building their businesses, and Main Street communities deserve access to credit on fair terms. Let’s stand up for those who stood up for us by tearing down this needless barrier to their success.

Our veterans kept their promise to serve us – now Congress must keep its promise to serve them. The Defense Credit Union Council will continue to champion these reforms, and I invite you to learn more or join our cause. Visit DCUC’s website (www.dcuc.org) for more information, including past letters and resources we’ve shared with lawmakers on why this change is so critical. Together, we can finally unshackle veteran entrepreneurs and all small businesses from an antiquated cap that should have been lifted long ago. It’s time to give those who have given so much every opportunity to thrive. Let’s get this done – fully repeal the credit union lending cap now.