Nearly seven years after Whatcom Educational Department Credit Union expanded its business services department, the CU is tasting the fruits of its labor.
The latest recognition being an award from the Northwest Business Development Association, which took notice of the Bellingham, Wash., credit union's SBA 504 loan program and its service to small businesses in Northwest Washington. The NWBDA is a certified development company that provides financing to small businesses in Washington, Idaho and Oregon.
WECU was the only credit union that received an award at the NWBDA's annual meeting in December, said Kent Bouma, business services manager at the $704 million credit union. It was also the first time the association recognized a CU for its lending efforts, he added.
Today, WECU has built a $100 million business loan portfolio and has amassed $50 million in business deposits. In 2004, WECU expanded its business department to further promote commercial loans, business Visa credit cards and commercial real estate loans. The following year, it restructured its business account procedures to accommodate Whatcom County's wide range of growing businesses.
WECU's commercial lending and real estate activity had increased so much that in February 2007 the credit union opened its 9,000-square-foot, $2 million Business and Home Loan Center. It is the first privately funded, green building in Whatcom County.
While credit unions have not been immune to the lending downturn, the industry has fared better than most banks. Bouma said WECU has experienced some delinquencies and charge-offs but the numbers are low. He credits having a conservative lending philosophy as the main reason for maintaining a clean portfolio.
"We've focused on good, cash flowing properties and strong businesses," Bouma said. "We tend to work with more established businesses. The criteria we like to see is those that have been in business for at least two years."
WECU will aid start-ups if they are feasible, Bouma noted. The range of businesses the credit union has approved loans for run the gamut from multifamily properties to construction to those in the service industry. Loans to nonprofits such as churches have also increased.
Aiding that growth, the SBA's 504 loan program has turned out to be an advantage for WECU and small business owners, Bouma said. The long-term, fixed-rate loans are used for major fixed assets, such as land and buildings. Certified development companies work with the SBA and private-sector lenders to help provide financing.
Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50% of the project cost, a loan secured with a junior lien from the CDC, which is backed by a 100% SBA-guaranteed debenture covering up to 40% of the cost, and a contribution of at least 10% equity from the small business being helped.
"I've always been a strong advocate of the 504 program," Bouma said. "It's a win-win for the lender and the small business owner. You get long term financing that helps finance bigger projects. We did a number of loans in 2010 for various projects."
Bouma said WECU does not offer the SBA's signature 7(a) loans but there has been some discussion about possibly making them available to members at a later time.
Like many credit unions around the country, WECU is in the midst of a merger-heavy environment within the local banking community. Bouma said the credit union's competition comes from mostly community banks and some regional banks. A few of the community banks have been acquired by others leaving business customers looking for alternatives. WECU has used this void to its advantage.
"We're only based in Whatcom County. We have no branches outside of the county, so all decisions are made here," Bouma explained. "That's been important. People want that local lender relationship."
Bouma, a former banker, was careful not to disparage the local banks, saying there are some good ones in the area. Bouma's 10-year commercial banking experience along with similar expertise another staffer within WECU's business services department brings to the table may have helped the credit union's loan portfolio maintain and grow. Former bank customers who are now WECU members are familiarized with the credit union philosophy, an introduction that might reassure some who were never aware that cooperatives can meet their business needs.
"We've seen some business owners come over from banks. The trouble that financial institutions have had has affected our area, just like everyone else," Bouma said.
With the exception of two loans, WECU's loans have helped fund businesses primarily within its home base of Whatcom County, according to Bouma. This year, plans are in place to add remote deposit capture and ACU capabilities. There are five staffers working in the business services department with another one scheduled to start within weeks. Bouma said another lending officer may also be hired.