March 10, 2010                                                               

 

Legislation Could Help Credit Unions Fuel Entrepreneurial Engine

 

Training Will Help Create The Ability To Respond To Opportunity

 

 

Not so long ago, automobile loans filled credit union portfolios. Now, with demand for cars in low gear, other types of loans are picking up the slack. And if legislation passes, more credit union members may be able to run ice cream parlors, dry cleaners and lawn services, thanks to credit union financing.

 

The new law, if adopted, would boost the amount credit unions can lend to members who own businesses. Capability would increase, but in many cases, credit unions would then need to increase their ability to provide loans that are always more complex than auto loans. Southwest Corporate Federal Credit Union, together with its partner Credit Union Business Group (CUBG), can provide credit unions with the necessary ability to take advantage of the new potential. 

 

Credit unions currently can have up to 12.25 percent of their assets invested in member business loans. The percent of assets limitation could increase to as much as 25 percent if legislation is passed. The credit union industry has been working for months to line up enough congressional support to pass the legislation.

 

“We’ve seen efforts to enhance member business lending legislation in the past, but this is the most energy we’ve ever seen applied to this effort,” said Larry Middleman, president and CEO of CUBG. “If the legislation passes this time, it will really make a difference.”

 

“In these tough times, the economy is shedding jobs,” Middleman noted, “but in some cases, that stimulates some to go into business for themselves.” However, to jump start the entrepreneurial engine, you need funding for fuel. “Credit union members have business ideas and are looking for funding to help turn dreams into reality,” Middleman said.

 

Lending money to credit union members interested in running a small business, though, can create big risks. Training is essential.

 

Southwest Corporate—through its association with CUBG—can help credit unions obtain the training they need as they consider offering services to business members. CUBG is a credit union service organization partially owned by Southwest Corporate. Last year, CUBG conducted 28 regional seminars and 85 webinars. “That’s about a fifty percent increase of training opportunities over the year before,” Middleman said. (Connect here with CUBG’s 2010 training schedule.)

 

“Credit unions have an opportunity to help as banks continue to restrict credit,” Middleman said.  “Credit unions are hearing: ‘I need financing. It has dried up.’”

 

Middleman, who has been helping ease credit unions into business services for the last several years, said the demand for financing shows considerable diversity. “About half the loan requests we are seeing are for equipment to keep businesses operating and expanding. The other half of requests are for income property: fourplex apartment buildings, small strip-mall buildings, that sort of thing.”

 

Middleman said CUBG’s training emphasizes “getting the basics right.” He said the training helps credit unions think about balance—successfully managing a couple large deals in with a lot of small deals. He said interested credit unions can have a program up and running in three to six months. Since its inception in 2002, CUBG now serves 326 credit unions in 39 states across the U.S.

 

 “We find considerable interest in the marketplace for CUBG services,” said Karen Coble, vice president of sales for Southwest Corporate. “Banks have tightened up their credit significantly and more small businesses are turning to credit unions for financing.  A lot of opportunities are available now for credit unions to bring in new business,” she said.

 

“Credit unions are looking at ways to bring in deposits and boost fee and interest income. Business services are a perfect way to accomplish this,” Coble said. “With CUBG, credit unions can eliminate significant expense and have an experienced and reliable third party for credit evaluation, document preparation, and other requirements for a successful program.”

 

In addition to helping connect credit unions to CUBG, Southwest Corporate can also help interested credit unions provide business capture—a service that allows credit union members to deposit checks electronically from their business locations—saving time and money.

 

For more information about how Southwest Corporate can help credit unions serve members who have businesses, contact an Account Executive at 214-703-7500 or by email at contactus@swcorp.org.