Credit unions, while still a fairly small percentage of the business lending community, have a growing importance in business lending and can continue to promote local economic development by helping fund startups.
Vermont Credit Union ($330.1M, Burlington, VT), Melrose Credit Union ($1.5B, Briarwood, NY), and Mountain America Credit Union ($2.9B, West Jordan, UT) have all proven leaders in business lending from Sept. 2010 to Sept. 2011, according to the recently released Callahan & Associates 2012 Credit Union Directory.
Total outstanding business loans climbed to $32.3 billion in the credit union industry, up 5.6% from 2010, Callahan data shows. Vermont Credit Union scored 1,302% growth in 12-month member business lending, the largest gain of any credit union in the past year; Melrose Credit Union was the top performing credit union with member business loans outstanding; and Mountain America Credit Union had the most Small Business Administration loans outstanding.
Obviously, if federal legislation introduced last spring allowing credit unions to lend even more to businesses passes, credit unions would have even more leverage to help their local communities. Currently, credit unions may lend up to 12.5% of their assets to businesses, but the new law proposes that cap be raised to 27.5% of their total assets.
For its success in SBA lending, Mountain America CU has hired “very experienced” SBA professionals as they’ve deliberately focused on the association’s 7(a) Loan Program, which includes loans for exporters, rural businesses, businesses that have been affected by North American Free Trade Agreement, says Mike Turner, Mountain America’s senior vice president of consumer and indirect loans.
“We like the guaranty percentage and our delinquency in this portion of our SBA portfolio is the lowest,” Turner says. “We have also done some increased training with our branches so they are not intimidated when a member asks about SBA loans.”
Mountain America CU also holds commercial real estate loans in its business lending portfolio and has focused on increasing it by securing referrals from previous borrowers and from its branches, Turner says. The credit union works closely with its business deposit base and nabs many referrals from those individuals.
“We recognize the risks associated with large business loans so we lend in this area with the utmost care,” Turner says. “We focus on those areas where we feel there is acceptable risk. For example, we don’t currently do development loans or land loans. We feel the risks are too high in these areas. We focus on what we do well and accept the fact that we can’t be all things to all people.”
Turner says its business lending staff, including all its senior executives who all have more than 20 years experience in business lending, focus on speedy turnaround time, which causes our members to have a good experience. Mountain America CU’s lenders often give members a response to their applications before they hear from another lender.
Thought the credit union does little marketing or advertising for its business lending, it does host an annual open house for its business members, extending personal invitations and hosting expert speakers to address timely topics in the economy. It provides lunch and thanks its members at the event.