Best Practices Drives Business Lending CUSO Alliance Creation
Beardsley, CEO of Michigan Business Connection LC, and Reed, CEO of Cooperative Business Services LLC, swapped stories on everything from lending practices to loan participations. It didn't take long for them and other business lending CUSO peers to get together informally at NACUSO events to share best practices. By 2007, eight of the executives met as a group vowing to connect each year from then on.
Last week, the group, now comprising 15 business lending CUSOs, made it official with the launch of the Regional CUSO Alliance. The networking unit aims to promote sound business practices particularly with loan participation activity in their respective local markets.
"This new and unique initiative provides opportunity for all CUSOs within the alliance to better serve their consortium of credit unions by utilizing a fresh approach to business lending," said Reed, who oversees Cooperative Business Services, a Cincinnati-based CUSO with nine credit union owners and 34 subscribers.
The new alliance represents 15 regional business lending CUSOs, 422 credit unions, 149 full-time employees and an aggregate loan portfolio of $2.2 billion. Together, the CUSOs represent California, Colorado, Florida, Illinois, Iowa, Kansas, Kentucky, Michigan, Missouri, Nebraska, New England Area, New Jersey, New York, Ohio, Pennsylvania, North and South Carolina, South Dakota, Texas, Wisconsin and Wyoming. While membership protocol has not been developed yet, the profile is natural person-owned CUSOs serving defined geographies.
Over the past three years, the group has formally met in St. Louis, Denver, San Antonio, Texas and Orlando, said Beardsley of Michigan Business Connection, which recently partnered with CenCorp Business Solutions LLC, a subsidiary of Central Corporate Credit Union, to help move loan participations.
"There is something special about being able to share best and worst practices with your peers in an open agenda format," Beardsley said. "The group developed a lot of trust and identified a lot of similarities both with challenges and opportunities."
Many of the executives in the alliance found they shared some of the same lending practice concerns. It became even clearer that they were all on the same page on a number of beliefs, including local market knowledge and "boots on the ground" being critical to proper commercial loan management, Beardsley noticed.
"If you can't go eye to eye with a borrower, you can't properly manage the risk," Beardsley said.
Participation increments need to get smaller throughout the industry, the alliance members agreed. Smaller pieces of more loans will help diversify risk and keep credit union capacity strong and consistent, they suggested. Finally, even though the group had built a level of trust over the years, they all agreed to respecting each other and would work together in the markets they share.
"We can't have trust at our meetings and underhanded competitive behavior back home," Beardsley said the group agreed on.
The RCA said it was not developed to be a substitute for other trade organizations such as NACUSO. Each member still has the flexibility to make their own decisions about how they spend their time and resources. Beardsley, who is a member of NACUSO, said he "will remain committed" to the group, "which is critical to industry level advocacy." The group acknowledged that it may be difficult to compete with large-scale organizations but "working together we think we can develop and share niche capabilities and expertise and provide some scale to help our credit unions and their members compete."
On the regulatory end, the alliance said it recognizes and promotes the importance of safety and soundness throughout the credit union industry and "hopes regulators agree with our shared beliefs."