Kent Moon Implores Time is Now for Credit Unions to Get off the Fence with Business Lending
SALT LAKE CITY, Utah -- If you're looking for the hype man for business lending within the credit union movement, look no further than Kent Moon.
For those removed from Generation X and Y lingo, the hype man is the energetic person who comes on stage to get the crowd moving and worked up into a frenzy before the star makes his or her entrance. Talking with the president/CEO of the Member Business Lending, LLC, one right away gets the impression that Moon is on a mission to press upon credit unions the competitive advantage of entering the business lending arena.
And, Moon has much to be hyped about. In under three years, MBL has shot to the top spot as the nation's largest Small Business Administration credit union lender, originating 40% of all credit union-based SBA 7(a) loans in the U.S, according to the CUSO. It produces 40% of all SBA loans in Utah and is on track to do 60% by year end. Among all SBA lenders in the country, it is ranked 20th. With 23 member-owners, MBL has $139 million in loans and $133 million in SBA loans in its portfolio.
"Today, America is positioned for better entrepreneurial opportunities but one of the biggest barriers is access to capital," Moon said. "I see this as one of the preeminent opportunities for credit unions to grow and develop their membership."
With more than 30 years of experience in the small business market, Moon is considered a nationally-recognized authority in commercial lending, small business development and Small Business Administration lending. The experience he brought to MBL when it launched in 2004 was probably more than any fledgling operation could hope for in leadership. As a senior vice president of Zions First National Bank, he designed and implemented virtually all aspects of the bank's small business banking program including marketing, processing, closing and securitizing the 7(a) and 504 small business portfolios. In three years, he said the portfolio went from $1.2 million to becoming the 15th largest in the country.
Moon is a walking encyclopedia on SBA guidelines having served as district director of the agency's Utah district office overseeing all of the loan programs. His expertise was also used at SBA's headquarters in Washington in a number of roles including financial analyst and senior technical advisor where he developed many policies and procedures still in place at the agency. Google Moon. He's authored a number of books and articles on small business and American Capitalism.
Credit Union Times recently talked with Moon about what it takes to really cater to small businesses, SBA's strong traits and faults, his leadership style and what banks and credit unions really have in common.
CU Times: The data, whether it's from credit union groups or banking regulators, continue to show banks have a chokehold on the business lending marketplace. To be fair, banks have been at it much longer. Are banks and credit unions' approaches to business lending really all that different?
Moon: Banks are a little more commercial lending knowledgeable. Credit unions have better IT and have more customer-based support than banks. Providing the right kind of capital at the right time and at the right growth--banks and credit unions do that poorly. They both have advantages but no one has hit the bulls-eye on addressing small businesses.
CU Times: What is it about small businesses that financial institutions tend to miss the mark on?
Moon: Small businesses go through a different growth curve. All businesses have different types of needs. Lenders that understand how to provide the best kind of capital are the ones that will be successful. Small businesses have a very critical need of maintaining a good level of working capital. It ties into their liquidity needs. Traditionally, banks provide [capital] through revolving lines of credit with 84% having maturities of less than one year. Sixteen percent of bank loans are moderate term loans due in four years or less. If credit unions or banks do not provide revolving capital lines, [small businesses] have to turn to consumer credit cards or home equity loans, which tend not to facilitate their growth needs.
CU Times: For the past few years, the Credit Union Regulatory Improvements Act or CURIA starts out with full steam but ends up falling by the way side. Some in the industry believe what is holding up that bill is the part that increases the current cap on member business loans from 12.25% to 20% of assets--what are your thoughts?
Moon: Legislatively, that's probably a good approach. But there are other approaches that are not being approached. Credit unions could provide an off-balance sheet securitization program where the member ending cap would be eliminated. The securitization model would be used in commercial loans, be it owner-occupied real estate or even with credit cards. The participation program is one that everyone focuses on but it's not always a viable alternative.
CU Times: The SBA has made a number of strides in revamping its disaster loan assistance program, which was widely criticized after the 2005 hurricanes. As a whole, the agency says it's working harder to make its loan programs efficient for lenders and maintains participation fees for lenders have not increased. As a former SBA insider, is the agency doing all that it can?
Moon: They need to be more efficient. They hold credit unions to a different standard than banks. SBA wants to show that they've done due diligence in showing that credit unions are capable [of participating in the agency's loan programs]. It goes into the area of regulation. NCUA counts MBLs different than SBA loans. One of the miscommunications is when SBA asks how many business loans [does a credit union] have. Well, home equity loans can be business loans. There's been a world change shift. One of the things [Member Business Lending] does is makes sure we have all the clarifications in place for credit unions.
CU Times: And what about SBA's zero subsidy with its 7(a) loan program? Is that a good idea?
Moon: The zero subsidy has been a perennial debate. It says SBA could make enough fee income to sustain itself. I believe with the downsizing of the agency, the fees have been excessively high. I adhere that fees have been a negative subsidy. The government has been making a profit. Fees are too high for borrowers and they need to be legitimately reviewed to see if they can be reduced. There are ample funds to cover fees. Based on the existing fee structure, there are excess funds, which mean too many fees are charged. Appropriated funds are established every Oct. 1 of the fiscal year. The issue is money is allocated on a first come, first serve basis. Now, if the agency has appropriately budgeted, then there's no shortfall of funds. Congress has the authority to do supplemental appropriation.
CU Times: Switching gears, how would you describe your leadership style?
Moon: I believe in the lattice pyramid. It's typical to have the president at the top. That's a command and control position. That has it's place. The lattice overlays the pyramid. Everyone had the opportunity to explore. We all work together to be efficient and if there is a problem, we can't resolve, we have the people to give directions.