When it comes to business lending practices, policy is the guiding principle to turn to.
Larry Middleman, president/CEO of CU Business Group LLC, offered that reminder during a recent webinar to discuss the business lending CUSO’s new member business loan policy template.
“It shouldn’t be too detailed, but also not too light,” Middleman said. “We hear from credit unions all over the country and understand what issues are critical to effective MBL risk management.”
The Portland, Ore.-based CUBG said it serves 392 credit unions in 43 states.
Middleman said over the past decade, the CUSO has developed and refined its policy template. Each year, the template is updated to help credit unions incorporate the most recent regulatory changes and best practices.
One of the major revisions to this year’s policy is a revamp of the risk rating system to segregate commercial real estate income property lending from commercial and industrial lending, Middleman said. This aims to create a better match of cash flows to the risk rating, he added. The CUSO’s upgraded credit presentation now focuses more on balance sheet analysis and includes more details on business history, marketplace and management information, risk monitoring and loan exit strategies according to CUBG.
“We’ve refined this over the years through the economic times and heightened examiner scrutiny,” said Jim Brekke, CUBG senior vice president and chief credit officer.
Middleman said it’s critical for a credit union’s board of directors and business loan committee to fully understand credit.
“It’s not just about doing a simple income property loan and calling it good. Credit unions are looking to diversify, to get into C& I loans, and into full deposit relationships. This updated credit presentation allows us to accommodate these types of requests.”