Guest Opinion: Tough Times Are Fertile for CU Business Growth
While unemployment is rising to ever higher levels, many displaced by this trend are heeding the the call of the entrepreneurial spirit.
Americans today, as in times past, are stepping out and starting new businesses to supplement household income. Truly, when times get tough, the tough get going.
This is precisely why the National Institutes of Health Federal Credit Union recently launched a small business program to serve its constituency. As the largest credit union in the nation serving the bio medical industry, the mission of the organization is evolving rapidly to align with the transformation of this segment we are chartered to serve.
Such an endeavor requires a significant commitment of time and resources to properly provide services to small businesses in a manner that is both safe and sound. That commitment comes with a challenge to prepare competitive offerings within the boundaries and controls that meet the regulatory standards of our times.
Small business is defined as those with sales under $10 million and less than 500 employees. Those may sound like big numbers, but they actually do not translate into very large loans. The average credit union business loan is $250,000 and is well collateralized with all of their business assets, or as in most cases, with real estate, and of course, their personal guarantee. Within the current scope of what credit unions can offer, there is a great opportunity to provide efficient and affordable services including many forms of loans to current small businesses as well as to support those starting up a new endeavor.
The SBA makes it easy for credit unions to become SBA lenders and is eager to assist them with their loan programs. The 7(a) program is great for those members who are starting a business or a professional practice as well as for any loan the credit union might feel carries too much risk. The only caveat is they have to own their own home as SBA likes to take a second look on the home to bolster the required personal guarantee.
The 504 program is also a great way to provide financing to a member who is buying a building to house their new business. Generally, the SBA will take 40% of the loan amount, the borrower will put down as little as 10% and the balance is your loan. So, your exposure is never more than 50%. Loans to existing businesses are easier because they have the required financial history on which to base your lending decision. There is no more rewarding experience for a lender than to start with a company and continue to serve their needs as they grow and develop their products or services.
At NIHFCU, we have been privileged to lend to medical and biomedical professionals. Our first loan was to a member that is a career medical social worker who recognized the growing need for medical transport within the Washington metro area. With the help of the SBA, we provided her the funds to realize her goals. Since that first loan, our member has been back to expand her fleet of medical transport vans.
Our second loan to a dentist said “The timing was perfect.I had recently refinanced my home with another lender and wanted to take advantage of low interest rates to refinance my commercial property. I was impressed by the easy and fast process at NIH Federal Credit Union, as well as the personal relationship I established with the business lending representatives.”
With our personal attention and products that fit for the small business owner, we are personal bankers. Successful business service initiatives are within reach for those that are willing to count the costs required to build a durable business model. This requires sound strategy, detailed preparation, highly qualified and experienced personnel and a commitment to operational integrity and controls that far exceed standard operations.
Juli Anne Callis is President/CEO of National Institutes of Health Federal Credit Union.
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