How to Implement Effective Member Business Lending

by CUNA Councils

by Loren Houchen

Member business lending (MBL) for credit unions, to be done safely and soundly, first of all necessitates that it be part of a solid overall ALM (assets/liabilities management) policy and strategy. Clearly, the reason that credit unions engage in MBL is to provide a strong value added service for members and to build reserves over the long term. In order to succeed on both of these most basic counts, your credit union may choose to seek outside expertise from an established business lending CUSO.

There are several ways for your credit union to meet your members’ business lending needs. Each way has specific considerations, with some overlap:

  • You can lend directly
  • You can buy participations from or sell them to other credit unions
  • You can engage a Credit Union Service Organization (“CUSO”) to assist in origination, underwriting, servicing and reporting

In all three, again in order to ensure safety and soundness, there are basic ground rules to follow.

First, know the regulations. Those provide the framework for lending, reporting, limits, waivers and examinations. Read and become very familiar with NCUA Part 723 and all twenty-one subsections. The regulations cover topics including definitions, prohibited activities, and implementation. You will also find references to Parts 701, 702 and 741 which address related topics.

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