In recent years, hundreds of credit unions have introduced short-term loans for members who face a temporary cash crunch. But some of the loans “are only marginally cheaper than traditional payday loans,” says Lauren Saunders, an attorney with the National Consumer Law Center.

The National Credit Union Administration, which regulates federal credit unions, last week issued guidance to its members, alerting them to the “risks, compliance issues and responsibilities” associated with a short-term loan program.

The agency issued the letter in response to the rapid growth of these programs in recent months, says John McKechnie, spokesman for the agency.

Federally chartered credit unions are prohibited by law from charging more than 18% on loans, but some charge excessive fees that drive up the effective rate, Saunders says.

For example, Nevada Federal Credit Union says it offers a 0% annual percentage rate. Brad Beal, president of the credit union, says it charges an application fee of $70 for a 14-day loan of up to $700, or $60 for members with direct deposit. That’s half the fee charged by the average payday lender, he says. But the National Consumer Law Center points out that a $70 application fee for a $400, 14-day loan is the equivalent of a 455% APR.

Saunders’ consumer group has recommended capping the annual interest rate for payday loan alternatives at 36%, including fees. But Beal says that works out to less than $10 per loan and wouldn’t cover his credit union’s costs.

“We’re not out to take advantage of our members,” Beal says. “We’re just trying to find a way that’s economical for them and economical for us.”

Lois Kitsch of the National Credit Union Foundation, the charitable arm of the credit union industry, acknowledges loans offered by a handful of credit unions resemble traditional payday loans.

But, she says, “there are a huge number of others that don’t look like them at all.”

Many short-term loan programs offered by credit unions require members to deposit a small percentage of their loan payments in a savings account, Kitsch says.

“Eventually, they’ll have enough money so they can borrow against their own savings at a very low cost,” she says.

And unlike payday lenders, Kitsch says, many credit unions give members 30, 60 or even 90 days to repay their loans.

The owners of Twilight Bistro are hoping to expand, but they said the market for loans is still tight.

“They want as much assets as what it is worth,” Twilight Bistro owner Joe Anglin said. ”If I had that I’d just buy it.”

Anglin said part of the problem is, the business is not only small, but new.

“We’ve been here less than two years, and our track record does show a profit, but still with only two years and not a lot of assets, we expected to be told no,” Anglin said.

“The greater the risk, which often comes in smaller start up companies, the harder it is going to be to get those dollars,” Tricia Hollander with Hillyard Lyons said.

Still, Hollander said there are more dollars to be had, and credit is starting to ease up.

“We tend to see the pendulum swing,” Hollander said. ”I think maybe we’ve swung so far in one direction that at some point we’ll come back to the middle.”

She said new credit card rules that took effect Monday don’t apply to businesses, but that exemption could have an impact.

Some banks may try to make up lost revenue on the backs of businesses, and some businesses may put their credit on personal cards.

That makes financial institutions nervous.

“That becomes a little bit of a muddy issue when businesses take on personal liability, so that is a concern,” Hollander said.

As for Twilight, they said their best bet for a loan right now is the small business administration.

They said the wait could be a little longer, but they believe it will work out in the end.

Hollander said some small businesses are avoiding expansion right now anyway because they are focused on getting their financial house in order.