MIRAMAR, Fla. — If there is a silver lining behind thebillion-dollar bank and investment firm mergers and the ongoingcredit squeeze, credit unions could be the beacon for smallbusinesses left out in the cold.

That seems to be the sentiment from several business servicesCUSOs reporting an uptick in not only loans and deposits butqueries that probably would not have occurred prior to the mostrecent marketplace consolidation.

At CU Business Capital, September has been the biggest closingmonth on record in terms of loan amounts and dollar volume, andOctober's figures have already surpassed its predecessor, saidMurray Halperin, senior vice president of marketing and businessdevelopment. Because the CUSO has a privacy provision with itsclients, it does not release specific numbers. However, Halperinsaid CUBC has about $150 million in the pipeline for the rest ofthe year.

“These bank mergers are going to create some huge connectionopportunities,” Halperin said.

The calls are already starting to come in. Two weeks ago, theCUSO received an inquiry from a bar association in another statethat previously housed its deposits with a “very high-profile bankin the news,” said Bert Bryan, president/CEO of CUBC. Theassociation wanted to move its deposits rather quickly to a creditunion. Another organization also sought out CUBC for a similartransaction.

“There's been a flight of businesses to places where they feeltheir business and corporate deposits will be safe,” Bryan noted.“On the deposit side, those credit unions that prepared themselveswith cash management are seeing an increase in deposit balances andfee income.”

CUBC serves 28 credit unions, recently expanded its NewJersey-based cash management facility and has hired three moreunderwriters to keep up with the demand, Halperin said. August andSeptember were record months in terms of loan applications comingthrough the door, he added. Still, there is much more room forcredit unions to grow in the business lending space. Halperin saidthat of the 2,200 credit unions with business loans on their books,most are loan participations. Bryan cautioned that even thoughsmall businesses are scrambling for credit access, due diligencecontinues to be a critical component.

“It's not just about grabbing any and every thing. Therelationships formed now will bring long-term growth to creditunions,” Bryan said, with Murray adding that cash managementservices have the potential to create sticky relationships.

Utah-based Member Business Lending LLC is still the No. 1 SmallBusiness Administration credit union lender in the nation,according to the agency. It has its finger on about 70% of all CUSBA loans and a $230 million loan portfolio (mostly lines ofcredit) of both SBA and conventional loans, said Kent Moon,president/CEO of MBL. September was also a record month with 222loans approved. And the increases are coming without having to makeany major adjustments.

“Our credit standards are very consistent, and with the currentcapital crunch, it's opening up an opportunity for us,” Moon said.“We're in a target-rich environment. Banks have pretty much stoppedlending.”

The cutoff is typical of bank merger fallouts, Moon explained.Small business lending is usually the first on the chopping block.Traditionally underserved by banks, he said, the small businessmarket represents more than 98% of the nation's economy. MBLdelinquency and loss rates are less than 1%, compared to 7.5% forthe banking industry's late loans, Moon noted.

“With this restriction in capital because of the subprimemarket, it emphasizes what small businesses have always had toconfront–cycles of inappropriate banking,” Moon said. “What'shappening now represents a change in the market. Credit unions canadapt to the changes, expand their lending base and increasecapital.”

California-based Business Partners LLC with its $1.6 billionloan portfolio has not been immune to the financial sector's flux.The CUSO has experienced a 25% decline in lending, said JeanFaenza, president/CEO. But, according to her, that's not unusualfor most lenders these days. States like California, Florida andNevada have been hammered with record foreclosures.

“Fortunately, we have commercial real estate and SBA loans.We're doing great,” Faenza said. “Those lenders who have SBA loans,at least have a guarantee. It's all about prudent lending intoday's world.”

Business Partners has seen its credit union lenders requiringmore collateral as capital access shrinks and banks turned thespigot to a trickle on applications, Faenza said. Before,businesses leveraged to grow their companies. Now the emphasis ison stabilization, she pointed out. The restrictions create streamsfor downtrodden business owners looking for relief.

“What we're seeing is borrowers wanting someone to sit down andtalk to them. What we're hearing from them is at their banks,everything is cookie cutter,” Faenza observed. “Their whole pointis 'my lender is walking away from me so why should I keep mydeposits here.'”

–[email protected]