Proposition 5 - Commercial Loans

by Donna McCollum

Proposition 5 could change the banking industry. Proposition 5 concerns commercial lending practices in the State of Texas. Texans seek hundreds of thousands of dollars, maybe millions, for a commercial prospect. Just like you do, they hunt for the best deal. Right now, the search usually ends out of state where commercial lending laws are more lenient.

Commercial bank CEO Tommy Ellison said, "Probably 40-something states today have more user-friendly laws as related to business loans than we do."

Proposition 5, if approved, would remove usury restrictions. This would help keep commercial borrowing for Texans in Texas. Ellison sees a bigger picture. He believes it could save the vanishing community bank. Ellison provided an example of how so many once-local banks are now operated by out-of-state corporations. "You look at the Bank of America building in Lufkin. They sold that building. The bank actually rents a small space on the first floor. All those people that used to be in that building, all those jobs, all those contributions. It's all gone."

Opponents contend changing commercial lending could put more pressure on small business. They would have to know banking laws and interest trends. Proponents say they should know that anyway. Ellison said, "If you're going to be able to attract allocations of resources to the state and if you want those decisions to be made by people you see at church and the school and in your community, then you need to be supportive of this amendment."

Ellison doesn't think proposition 5 will fix all banking problems but, if it doesn't pass, he fears the problems will get worse.