Nathan Hill | Manager of Underwriting, Member Business Lending
Across the United States, small business is anything but “small” business. According to the U.S. Small Business Administration (SBA), small businesses (defined as businesses with fewer than 500 employees) account for over 99% of all American businesses and close to sixty million employees.
As existing small businesses continue searching for ways to grow and prosper, more and more startup small businesses join the ranks. A common denominator amongst many small business owners is the need for access to reliable and consumer-friendly business services, especially business loans. Increasingly, traditional big bank lenders close doors and tighten screws on the business lending process, making it more and more difficult for these entrepreneurs to access the funds they need to help fuel the overall American economy. Regulatory burdens and ever-increasing red tape can also strangle the small business lending process for consumers.
Of all the millions of small businesses across the United States, all need business services, quite often this includes business lending. It is for these individuals, many of whom are working out of home offices or smaller retail shops, that credit unions can step in and fill the gap by providing critically needed business lending services and loans. If not, small business owners will take their business elsewhere, which often to their own detriment financially, and certainly at a loss to those credit unions not actively trying to secure this important niche of business.
From the credit union perspective as a lender, business loans are quite profitable. Additionally, if they are secured by the SBA, they offer less risk to the lender throughout the life of the loan. Credit unions should also look at business lending and business loans as excellent “sticky products” with which to deepen relationships with business members. For example, with a progressive brand and a solution-centric member culture, the credit union working to serve members with business loans can also cross-sell other products and services such as credit cards, bill pay, vehicle loans, checking accounts, etc. Members with more credit union products and services are much more likely to remain with their credit union for longer periods of time due to the deeper nature of this enhanced relationship. The importance and relevance of certain key credit union growth metrics including products per member and products per household becomes even more important when working with business lending members.
Credit unions that actively participate with and promote business lending services and business loans; therefore, help directly empower the growth not only of their own bottom line but also that of the small business owners/members they serve and the American economy. When approached from this perspective, the importance of credit union participation in business services and business loans is readily apparent. Credit unions that step up their business lending services embody the very spirit of the credit union movement and philosophy; that of people helping people and economic prosperity for all.
