Several credit unions in the Dakotas have the distinction that many of their peers elsewhere probably wished they had: a permanent exemption from the member business lending cap.
The clause came about in the late 1990s when the 12.25% of assets MBL cap was put in place, said Jeff Olson, political affairs and public relations director with the Mid-America Credit Union Association, the trade group that represents 78 credit unions in North and South Dakota. The roughly 20 credit unions in North Dakota and at least one in South Dakota were able to get an exemption because their original charters permitted agricultural lending before the MBL cap went into effect.
That advantage was one of the considerations on the table when seven credit unions in North Dakota, South Dakota, Nebraska and the Credit Union Association of the Dakotas' Mid-America Service Corps came together nearly 14 months ago to invest in the launch of a new MBL CUSO, Midwest Business Solutions LLC.
The firm will offer loan origination, loan participation, underwriting, servicing and quality control as well as ancillary business products such as merchant plastic card services, remote-deposit capture, payroll cash management, and commercial insurance.
"The association saw this as an opportunity through its service corp to be an investor and to work with smaller credit unions," Olson said. "It's an opportunity to open up new portfolios in new markets. There's been a lot of interest in both states."
Each investor is contributing an initial $100,000 to the CUSO, said Tyler Grodi, chairman of MBS and vice president of finance and chief financial officer at $862 million Black Hills Federal Credit Union in Rapid City, S.D. Other credit unions will have the opportunity to have different levels of ownership of the CUSO. Grodi said MBS will initially build its presence the Dakotas and Nebraska.
"Recognizing the importance of collaborating in the credit union industry, Midwest Business Solutions will help credit unions reduce the costs of providing lending programs and services to small businesses," Grodi said. "This commitment will allow Midwest Business Solutions to provide quality and affordable services, which will benefit credit union members throughout the three-state region who might not otherwise receive such business assistance."
MACUA is building on its outreach to entrepreneurs. In October, it launched a lending site for small businesses, which features a section on the benefits of and questions about working with a credit union, a search engine, and financial security. At the time, Robbie Thompson, president/CEO of MACUA, said small businesses in the region were finding it difficult to obtain credit in the midst of a still recovering economy. Still, credit unions in the Dakotas have continued to lend while other lenders have pulled back, he noted. The trade association said in 2009, credit unions loans grew 15% while bank business lending decreased more than 11% over the same period.