More Bang for your Buck: The Business Lending CUSO

Business loans were the fastest growing loan product in 2004. CUSOs allow credit unions to pool their resources and meet member needs.


Member business loans (MBLs) were the fastest growing component of the loan portfolio in 2004 for the credit union industry. MBLs grew 34.2 percent in 2004 to reach $12.0 billion overall. Although member business loans comprised only 2.8 percent of the industry’s loan portfolio, they will be making more of an impact in the next few years as credit unions start or expand their programs.

Many credit unions are responding to member requests and are establishing business-lending programs. Forty-one credit unions started programs in 2004 to reach a total of 1,642 credit unions in the industry with outstanding balances as of the fourth quarter. There are almost 87,000 business loans outstanding at credit unions as of the fourth quarter with an average balance of $147,170.

Business Lending via a CUSO

Credit union service organizations (CUSOs) are helping several credit unions enter the member business lending arena. Credit unions opting to join a CUSO benefit from reduced staffing and back-office requirements as well as the ability to negate the cost of establishing their own small-business infrastructure.

Northeast Member Business Services is a prime example of a CUSO that has started in the last few months to provide member business lending services to partner credit unions in the New England area.

Four Massachusetts credit unions took the initiative to pioneer the business services CUSO: Workers’ Credit Union ($486 million), RTN Federal Credit Union ($373 million), Metropolitan Credit Union ($577 million) and Unified Federal Credit Union ($157 million).

These credit unions are starting the CUSO initiative after noticing increasing member demand. “We used to have to send people [asking for commercial real estate loans] to the bank,” said Frederick Healey, CEO of Workers’ Credit Union. The CUSO gives the partner credit unions the opportunity to cross-sell other products and keep the member accounts at the respective credit unions.

Here’s how the process works. Once the CUSO and the credit union’s loan committee approve the loan, the loan officer visits the member business to submit the proposal. If all parties accept the loan’s underwriting and proposal guidelines, the loan is placed on the books of the individual credit union, which then decides whether it wants to participate a portion of the business loan to the CUSO.

Northeast Member Business Services plans to sign-up 10-13 credit unions in the region over the next few years.

“We are looking for credit unions in which the CEO and Board really want to be in the business,” said Scott Anderson, CEO of Northeast Member Business Services. “There is a certain volume that you have to maintain to justify the business model, and the CEO and Board must be fully committed to making it work.”

Several credit unions interested in member business lending are searching for partners and information regarding risk factors, internal policies, institutional support and other critical components of the program.

For more information, Callahan & Associates recently hosted a well-attended webinar: Growing Your Business Lending Portfolio. Click here to learn more information about what was discussed during that event.

There are also two published articles on member business lending:




April 11, 2005



No comments have been posted yet. Be the first one.