Benefits of business lending as a vehicle financing option for members

Let’s say you are a small business owner — an insurance agent, home construction company or consultant. You need a vehicle (or perhaps several vehicles) directly tied to your job to get work done. Typically, in order to finance such vehicles, members would go to their local credit union and take out a loan based upon their own personal credit and name.

This, however, poses challenges for the business owner. For example, if our hypothetical business owner has a small fleet of vehicles under his or her personal name and credit, they may count towards the traditional debt to income ratio and may limit that individual’s ability to acquire, for example, a home mortgage or other financial products and services which he or she may need; all because these vehicles are tied directly to his or her personal name and credit and not to the name and credit of the business.

Rather than running this legitimate business expense through a member’s personal credit, many may find it advantageous to link the loan to their business name and credit. That way, the loan is held under the umbrella of the business name and does not impact in a negative way, the personal name and credit of the business owner. Business owners can also grow and nurture their business credit in such a way. By obtaining the loan through a commercial lending program, such as may be made available using the Small Business Administration (SBA) loan programs, tax write-offs and other implications of securing a business vehicle are simpler in nature than if the member was to use traditional consumer lending.

Arranging vehicle loans in such a way is also of benefit to the credit union in that it helps increase overall loan portfolio, improves account relationships and business loan capacity and empowers members for future additional product penetration. It also offers a credit union the ability to realize a higher return on assets, as these business loans may be sold off at a premium if government backed.

We have developed a program that also designed to help introduce credit union staff at the branch level to business lending. From the outside, business lending can be seen as complex, time-consuming and, frankly, intimidating to many credit union employees. Such a program allows credit union staff to dip their toes into the business lending waters with a seamless program designed to be simple to learn and beneficial to both the credit union and its members. The program also allows credit unions to use their already-established and proven credit scoring system in order to qualify such loans, and ensure their member a legitimate business loan that may be closed within 2-24 hours.

Additional benefits of such business lending-focused vehicle financing include lower loan risk for the credit union (due to the government-backed nature of the SBA loan). The member will also realize potential longer terms with lower payments and lower collateral requirements than with typical consumer lending. Overall, the program offers positive gains and the potential for deeper and more meaningful product and service relationships for both member and credit union.

For more information about this program and the potential for your credit union to serve business member vehicle lending needs through the SBA program, contact Joey Duckworth at (801) 545-7935 or jduckworth@mblllc.com.