The Business Lending End Game

By Jim Devine

In the financial institution world, recently there had been much ado about something: S. 2231/H. R. 1418, the Credit Union Small Business Lending Enhancement Act. This significant piece of legislation would have lifted the credit union business lending cap from 12.25% to 27.5% of assets, helping close the credit gap and providing a much-needed boost for Main Street businesses.

For credit unions, their very survival is based on the ability to find new sources of income. In an environment where the traditional three revenue streams of consumer credit—net interest margins, yields from investments and fee income—are drying up, member business services may be an oasis for thirsty income statements.

Make no mistake, this salvation does not come without its challenges and pitfalls. Credit unions embracing business lending for the first time are struggling with the lack of expertise within their lending ranks. The solution to developing bench strength is to invest in underwriting and loan origination training. However, members seeking business loans will also want accompanying services, such as cash management, merchant services, employee benefits, and so on. There will be a significant investment and ramp up of staff and expertise needed to accommodate a full suite of products.

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