The Power Of Business Lending And Services

Credit unions across the country are committed to helping business owners thrive. Such a stance helps cooperatives improve their capabilities for and deepen their relationships with enterprises both small and large.

In Utah, America First Federal Credit Union ($19.3B, Riverdale, UT) counts approximately 80,000 businesses among its total membership of almost 1.4 million. Its business loan portfolio of $1.4 billion currently includes 296 SBA loans with a total balance of nearly $250 million, of which roughly 75% is guaranteed.

“The guarantee allows us to work with borrowers who have a good business but lack the strength that having their own capital provides,” says Blake Weathers, senior vice president of commercial lending at America First. “It makes it possible for small businesses or less established businesses to grow.”

Across the country, Arlington Community Federal Credit Union ($468.3M, Falls Church, VA), has been offering business loans since it gained a community charter in 2009. Its SBA engagement reached a peak during the pandemic, when it funded 283 loans through the Paycheck Protection Program. It currently has approximately 950 business members.

“This effort allowed us to support numerous businesses that were unable to get assistance from their banks,” says Kevin Sheffield, the Virginia cooperative’s business lending manager.

Sheffield has been with Arlington Community for seven years and transferred from another business unit to help the credit union handle the PPP crush. Since then, he’s gained an appreciation of the differences between SBA and conventional lending. SBA loans, for example, require detailed business plans, financial statements, and other documentation around eligibility and ability to repay. In exchange, the lender gets a government guarantee and the borrower often gets lower down payments and longer repayment periods.

Meeting Guidelines, Acquiring Talent

The SBA loan process can be complex. Documentation, requirements, and review can be quite extensive compared to conventional loans, Sheffield say, and it’s up to lenders to understand the intricacies.

“We have a team of experienced professionals who specialize in SBA lending and have established partnerships with key players in the SBA lending community,” Sheffield says. “This allows us to quickly identify loans that will or will not qualify, streamlining the process for our members.”

America First, meanwhile, has been involved with small business lending since Weathers joined the credit union in the mid-1980s. As the head of business lending — the credit union split lending from business services approximately three years ago — Weather leads a team that is scattered across the credit union’s home state of Utah as well as the other five states in which America First has a field of membership. According to Weather, SBA lending requires specialized talent to keep up with the “ever-changing” government program. That type of talent is difficult to cultivate internally.

“Trying to have someone learn SBA lending in-house has never worked for anyone as far as I know,” Weathers says. “We had to acquire and pay for people that work in that specific industry.”

Do’s And Don’ts For B2B Success

Indeed, working in business lending and services is a specialty that deserves its own level of attention, from developing and sustaining the appropriate range of products and services to ensuring the right people are in place to build and sustain relationships with those members.

According to Weathers, that starts with having a strategy.

“Hire and pay talent to develop and execute a plan of action,” the lending SVP says. “Along the way, check your markers of success and adjust as needed. Treat it like a business on its own instead of having an employee add it to their already busy job.”

Sheffield at Arlington Community offers further insight into business lending.

Do:

• Collaborate with consultants or partners to establish robust policies, procedures, LOS, underwriting, and other essential frameworks.
• Develop a clear strategy and niche to guide the credit union’s operations and services.
• Listen attentively to members to understand their needs and challenges, then offer personalized solutions and services that cater to small businesses’ specific requirements.

Don’t:

• Neglect the importance of building strong relationships with members.
• Offer one-size-fits-all solutions that might not meet the needs of small businesses.
• Ignore the impact of industry trends and regulations on the credit union’s offerings and operations.

Serving Businesses Serves The Community

Serving businesses serves the entire community, and the reach can be broad. America First’s business members include accommodation and food services companies, health care and social assistance providers, construction, manufacturing, retail, transportation, and warehousing, “just to name a few,” Weathers says.

“We do small loans for Visas and lines of credit in the hundreds of dollars up to commercial loans in the multi-millions,” the veteran Utah lender says. “Each business is different and run differently and each has their own needs and wants. Relationships need to be built over time and the business owner needs you to understand their business. The better we as lenders do, the better we can help them.”

Arlington Community’s business members are a similar mix of enterprises. Sheffield says its largest is a real estate holding company with a loan of more than $1 million and the smallest is a nonprofit with a $20,000 loan.

“It’s worth noting that our niche is small business lending, an area often overlooked by larger commercial banks that primarily focus on larger loans,” Sheffield says. “Although we do have larger loans in our portfolio, we strive to serve and support the typically underserved small business sector.”

Affordable financial solutions and personalized service helps those small businesses succeed — and that contributes to the community’s economic vitality, Sheffield says.

“This commitment reflects ACFCU’s core values of community service and member empowerment, driving positive change for all members,” he says.

Is It Time To Evaluate Your Lending Strategies?

Use industry data to determine how your credit union performs against others, uncover new areas of opportunity, and support your strategic initiatives. Callahan’s credit union advisors are ready to show you how — are you ready to see how you stack up?

Request A Demo