It's a trend across the nation: Credit unions are making more business loans, while banks are making fewer.

Many of the nation’s 7,500 credit unions might be making even more business loans if they successfully lobby Congress to change a law that caps how much they can lend to businesses. The law caps credit unions’ business loans at 12.25 percent of their assets, said Bill Hampel, chief economist for the Credit Union National Association in Washington, D.C.

The association has been lobbying Congress to increase that cap to 27.5 percent of total assets, Hampel said, as raising the cap is important to keep money flowing to small businesses.

“Although the demand for businesses loans is down, the supply [from banks] is down as well. This tells us, though, that businesses that are trying to borrow are finding that their financing is drying up,” Hampel said.

The problem for credit unions is that they start slowing down their business lending when their portfolio hits 7 to 8 percent of their assets, he said.

“Once you go to 7 or 8 percent, you are a year or two away from hitting the cap, and at that point, you have to start rationing loans.”

For Andrew Mossman, a strip-mall owner in Albuquerque, New Mexico, a credit union came through with a loan refinance after a four-year search for a traditional bank.

“The credit union took a different approach than traditional lenders,” Mossman said. “They’re interested in good leases, and they look at the situation on a case-by-case basis. Most other lenders look at your entire portfolio. My portfolio is limited, but they looked at the project on its own performance.”

Something similar happened to Ralph-David Raby, president of the Raby Companies. He had been trying to secure loans to renovate 54,000 square feet in two commercial buildings the firm owns in Albuquerque’s Renaissance Center and in Santa Fe.

Raby had loan commitments from two banks, but he saw a direct-mail flyer from New Mexico Educators Federal Credit Union and decided to investigate. Within 60 days, Raby had a loan from the credit union, which he said was for a longer term and at a better interest rate than the banks offered.

“Overall, we have gotten more than we expected from the standpoint of the terms; they were very affordable in comparison to some of the competitors. They were very aggressive. I don’t think I had looked at a credit union as being a source of commercial lending, but they caught us off guard,” Raby noted.

In the past year, New Mexico Educators, which has 122,168 members and $1 billion in assets, has tripled its business-loan portfolio from $5 million to $15 million.

Credit unions don’t have to constantly increase quarterly profits for shareholders, so they can usually offer better business-loan deals, both in the length of the loan and the interest rate, Rick Baca of New Mexico Educators Federal Credit Union said.