The buzz words in the credit union industry are Member Business Lending. The reason for the buzz is legislation before Congress to allow credit unions to increase business lending to be raised to account for no more than 27.5% of total assets up from 12.25% on the books. The passage of the legislation would be a boost to the credit union and small business as this will open additional avenues of financing that has been restricted by the commercial banking industry. The credit union faces a tough fight as commercial banks attempt to focus on the inexperience and risk in allowing the credit union into the business lending market.
The one fact is certain that commercial banks have not met the fiduciary responsibility to meet the lending needs of the small business community in recent years. The passage of the pending Member Business Lending legislation would allow more financing options to the small business community. The argument of inexperience in business lending can be negated with the credit union industry use of strategic partnerships with former commercial bankers that are willing to assist in the implementation of business program as a staff member or contract consultant. The experienced banker would bring the experience to develop a business program to ensure additional training and appropriate staffing to negate the possible risk of opening the credit union to the business lending market.
In a strategic partnership, the former commercial banker can advise on all areas of the implementation of a business program with a credit union. First, each credit union will have different business segmentation program relative to the region and members served. This unique segmentation for each credit union will require appropriate accounts and lending products to meet the needs of the business clientele. Second, the staffing and training are two other components essential to the implementation of a business program. Third, additional services are essential and relevant for the credit unions to offer in the market. Fourth, the compliance piece is essential for mastery by the credit unions to negate risks and adhere to regulatory requirements. The experienced former commercial banker can assist in all four areas to ensure a seamless implementation for the credit unions into the marketplace into Membership Business Lending.
In conclusion, the commercial banking argument is raising the cap for credit unions to underwrite more business loans will pose a risk because of the inexperience of the credit union industry in loan origination to businesses. A strategic partnership of the credit union industry is to rely on former commercial bankers to provide the insight and knowledge to negate these risks and null the argument from the commercial banks. The commercial banks are not providing the necessary services to the small business community, and the market should be open for more competition to this market. The commercial banks want to keep the credit union industry out, but the commercial banks want to service the small business in a status quo mode. The status quo is not working, and the commercial banking industry must realize that “they can’t have their cake, and eat it too”.