Credit unions in the business of serving business members are pretty common today, led by sophisticated operations “that have been at it for a while and have the scale to go toe to toe with commercial banks for $35 million loans,” says Brian Mielke of Servion Commercial Loan Resources.
At the other end of the spectrum, some financial cooperatives are just beginning to take advantage of business lending as “a fantastic way to diversify beyond consumer loans,” says Mielke, VP/national sales director with the New Brighton, Minnesota, CUSO. “Commercial loans tend to be longer term and higher yield than consumer loans. If the rate on a business loan is 5% and car loans are going at 3%, and the credit union’s cost of funds is 2.5%, the spread is much better.”
Another difference in the risk profiles of consumer auto loans and business loans is that a solid business lending portfolio with a core of commercial real estate is secured with property that typically appreciates in value, in contrast to the steady depreciation of car loan collateral, he notes.
As credit unions look to grow their business lending capabilities to take advantage of those opportunities, industry experts offer these recommendations:
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