MBL Powers National Recovery & Income in 2013
by Jim Jerving
Credit unions have been providing business loans since their beginnings more than a century ago. But like student loans, they are sometimes given and recorded as credit card or home equity products. After the financial debacle in 2008, more Americans are becoming entrepreneurs. They are powering the economy and the recovery as small businesses now number 26 million or 98% of all enterprises in the United States.
An informal debate within the industry, though, is quietly taking place on the best method to provide member business loans—internally or externally, says R. Kent Moon, president/CEO of Member Business Lending LLC, the largest business lending CUSO in the United States, headquartered in West Jordan, Utah.
Moon gave participants at CUNA’s Lending Council in Miami Beach on November 6 insights on both the benefits and opportunities of providing business loans through the CUSO model. He also highlighted promising developments in the business lending environment.
Business lending, for instance, is poised to take off in 2013. The U.S. House of Representatives authorized $16 billion in Small Business Administration 7a lending authority for 2013, a 33% increase over 2012. That was with a Republican-controlled House that rejected most spending increases for the past two years.
Tripling Loan Balances
“If credit unions capture just 6% of the SBA 7a market, it would triple the current credit union 7a loan balances,” says Moon. “In doing so, they would become a significant contributor to the national economic recovery.”
SBA loans offer a chef salad of benefits for lenders. For starters, there is reduced risk as 50% to 85% of the loans are guaranteed. Only the unguaranteed portion of the loan counts against the business loan regulatory cap of 12.5% of assets. There is also an increased profitability that has the potential to notch up an ROA of 3% to 5% on these loans, according to Moon. Additionally there is a ready secondary market for SBA loans.
