Understanding relationship business lending

Many credit unions don’t have a full understanding of what a business services program includes. Business lending is about much more than simple real estate loans. In fact, 84% of all business lending is cash oriented. In order to grow their business services program, credit unions must more fully embrace the deeper nature of relationship business lending.

Relationship business lending leads to more than the one-off experience of traditional transactional lending. Understanding the deeper cash needs dynamic of business account members is critical to strengthening the relationship.

Managing Cash

Helping business account members manage cash is a primary goal of a credit union relationship business lending program. This is now done primarily through high-tech means, including ACH, remote deposits and debit/credit cards. The goal here is to help your business accounts manage their cash remotely and efficiently. Business account members want their credit unions help in managing cash; however, they primarily want this accomplished through quick and easy remote means. Coming to a branch or having to telephone in about a cash management situation is another time drain on an already burdened daily work schedule for business account members.

Providing Cash

The priority here is providing quick access to cash for business account members. This involves revolving lines of credit, business credit cards and traditional lines of credit. Credit unions must also be prepared to do C&I (commercial and industrial) loans. Providing fast access to cash when businesses need it enables a credit union to more fully understand the dynamics and needs of business account members and to sink deeper roots into that relationship.

Dynamics of Cash

This involves a more holistic understanding of the cash requirements of business account members. A good example of this is recognizing and empathizing with the seasonal cycles of certain businesses. These could include: retail that is heavily dependent upon Christmas shopping as well as the seasonal needs of ski resorts and summer resorts. These businesses (and to some extent, all businesses) experience fluctuations in the natural cycle of their fiscal year. Credit unions providing relationship business lending must be attuned to this and prepared to provide services that complement those needs.

Understanding the needs of business account members (including cash management, cash provisions and the dynamics of cash) enables credit unions to more fully provide for business needs. Credit unions that successfully dive deeper into this dynamic relationship with business account members position themselves proactively as the primary financial institution for these members.