HARAHAN, La. - Only a handful of Louisiana credit unions have dabbled in member business lending. The Louisiana Credit Union League is hopeful its new partnership with the National Cooperative Bank will encourage more credit unions to make MBLs. Louisiana credit unions, like credit unions in other states have had to deal with the same dilemma since the passage of The Credit Union Membership Access Act, H.R. 1151. On the one hand they've been faced with a member business lending regulation that caps credit unions' MBLs at 12.25% of total assets, with some exceptions. But what constitutes a business loan? "In our state someone could use a loan to buy a shrimp boat," said LCUL President/CEO Anne Cochran. "The shrimp boat would be the collateral. So would that make this a business loan or a collateralized loan? If our credit unions make a loan, it's not to build a strip mall." It's a question Wendell Heflin, vice president, NCB has been asked many times by credit unions. At press time, Heflin said NCB was working with about 18 credit union leagues-"a select few," he said without naming them-since last year on helping credit unions become more experienced in making member business loans. The program was piloted with the assistance of the Georgia Credit Union League. NCB's relationship with credit unions actually pre-dates H.R. 1151. The 22-year old bank has worked with credit unions and leagues at different levels since 1986 and of those, said Heflin, many have had relationships with NCB for their capital needs. Chartered by Congress in 1978 to address the financial requirements of cooperative businesses, NCB has originated about $6 billion in transactions since its inception. Loans sold and serviced for the secondary market now exceed $2 billion. While NCB can loan up to $1 million to credit union members, Heflin said the typical business loan it's made has been around $300,000. In each instance, NCB underwrites the business loan and makes the credit decision. The credit union in turn has the opportunity to buy participation in the loan. If the credit union already has business loans on its books that it wants to off load, it can offer to sell the entire loan to NCB or part of it. A credit union that either makes a MBL through NCB or who sells all or part of a business loan to the bank also has the opportunity to rent on a per transaction basis from NCB a loan monitoring, an invoice and billing service and an underwriting service. With more exposure to member business lending opportunities, Heflin said he anticipates most credit unions will become good business lenders, "but that will take time and experience," he said. For now, business lending is new territory for most credit unions. Credit unions need to focus on their relationship with their small business member and treat that relationship as a pie that's been sliced up, Heflin advised. "They have to look beyond their relationship with members as being just a lending relationship," he said. "They have to look at the whole pie." The revenue slice of the pie for the credit union is the transaction. That's the slice of the pie where the money is for them. There's not much money for credit unions to make in loans because the margins are too thin, he said. "We're telling credit unions we're a slice of that pie," Heflin said, and "they can't just have a slice of the pie, they have to take the whole thing." At press time, the LCUL planned to hold an informative meeting July 18 at Baton Rouge Teachers FCU to discuss the business lending partnership between the league and NCB. Even if only a handful of credit union representatives show up, Cochran said she won't be daunted. "At least we'll have provided them with useful information about business lending and the National Cooperative Bank. This is an opportunity for our credit unions to maintain their relationship with their members and be in compliance with the law at the same time," she remarked. -
ekingoff@cutimes.com
