After the demise of several high-profile credit union businessand commercial lending programs over the past few years, examinersare applying more scrutiny to the way credit unions conduct theiroperations.

And, with the recently amended CUSO rule that calls for the entities to file financialreports directly with the NCUA and the appropriate statesupervisory authority, regulators are working harder to prevent anyfurther losses to the share insurance fund.

To stay proactive, keep examiners happy and become more of aplayer in the small business space, CU Business Group, a Portland,Ore.-based business lending and services CUSO, offered 10 tips onhow credit unions can keep their programs in check.

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1. Organize your loan files neatly andconsistently.

From his experience, one out of three credit union loan filesare in some state of disarray, said Larry Middleman, president/CEOof CUBG.

“If you have paper files, clean it up. Now, many have goneelectronic. When you have examiners coming in, first impressionsare key.”

2. A high yield on a business loan is there for areason.

In this market, 4% to 5% is a pretty good rate right now,Middleman said. A credit union might be able to refinance at 6% ifthe business has a good track record and can prove themselves.Another good reason credit unions or certain entities like a CUSOwould charge higher than market rates is when an establishing aneffective niche.

Ultimately, when it comes to high yields, Middleman said, “Ichallenge you – ask, is it a risk we don't want to take?'”

3. Have a meaningful risk rating system for pass rateloans.

Middleman said “this is a pet peeve” because when credit unionssay “everything is a three,” it's not good for the management orthe board.

“Why do you have criteria where you cannot do a one-rated loan?”he asked.

The bottom line is credit unions can indeed have one-rated loansparticularly in those cases when the member is “a very strongborrower that is rock solid with your credit union,” Middlemansuggested.

Read more: Don't get emotionally attached…

4. Don't get emotionally attachedto a loan request.

Credit unions that are relatively new to business lending, tendto have this problem, Middleman said.

“The length of a time as a member should not be a factor,” heurged. “It is not underwriting criteria. In 2008 to 2010, I wasamazed at the number of heavy hitters that got too highly leveragedand everything they did in business lending had turned to gold.”That all changed when the economy took a turn and everythingstarted to collapse, Middleman recalled.

5. Use written proposals to communicate the value youbring to the business relationship.

“This is something credit unions don't do well,” Middlemansaid.

A written proposal of no more than two to three pages thatspecifically states how the credit union will save a business time,money and how to make them more money can make significantstrides.

“If you put it in your written proposal, I guarantee it will addvolumes to that business. Show at least a brief snapshot of atransition plan – who's going to handle what.”

6. Maximize the business check program.

“I know some are saying 'who writes checks anymore, they'regoing away,'” Middleman said. “Yes, consumer checks are on thedrafting block but businesses have a lot of reasons to write checks– for tax purposes, for audit purposes.”

The average business check order is $70 and a portion of thatcan be fee income for credit unions, Middleman noted. The typicalrebate that check printers offer to credit unions is about 10% to20%, he added.

“Get them hooked into (checks) when an account is opened. If youdon't, you're missing out on fee income.”

Read more: Find your niche.

7. Identify your niche.

Credit unions should ask, “what are they doing better thananyone else?” Effectively communicate in 30 seconds or less whatyour niches are, Middleman said. The senior management team andboard of directors should also know what they are too.

Identify where you want to be in lending — for instance, retailbusinesses or bigger facilities. Find out where you excel and goafter it.

“During my banking days, we were known as the low costprovider,” Middleman said. “Our pricing on deposit products andservices were lower than Bank of America and Wells Fargo. We ledwith 'we can save you money. We also had a good branch network. Ourtarget was a one to 20 mile radius of where the businesseswere.”

8. Sophisticated small businesses will wanteverything.

Middleman said while he's glad to see some credit unions serving“mom and pop businesses, because there's a place for those,” butone goal would be trying to move up the ladder to serve businessesthat will be more meaty and profitable.

He pointed to a focus group of 10 small businesses that convened to discusstheir needs and where credit unions fit in addressing them. Themost important request was being close to a branch, they said.Others valued access to credit. Roughly four of the participantssaid the deposit side was more important than lending services. Asfor technology, some used remote deposit capture religiously whileothers could not care less, Middleman said.

“The point is you need a nice package of services. Every one ofthose businesses had high value for service and having a pointperson when they needed help,” he pointed out.

9. Branch integration requires significant effort and itstarts at the top.

There should be a nice balance of expertise to answer questionsand talk about complete products such as remote deposit capture,Middleman said. Then, referrals can be made to the central area forfollow-up, he added.

“I can tell you that credit unions struggle with this left andright. The answer is it starts at the top. If the CEO preachesevery single week 'we are going to have an effective branchnetwork,' it will get done.”

10. Change the perception of the credit union as aplayer in the business market.

Middleman said he learned this from that focus group of 10business owners. Among their complaints were not getting timelyresponses from credit unions and not receiving adequate help,especially on the lending side. Some didn't even consider creditunions when it came to their business service and lendingneeds.

“Step one is simple awareness. Step two is chipping away atbusinesses where you have a product or service advantage. Thebusiness owner might be an existing member,” Middleman offered.“Stay in touch. At some point, Wells Fargo is really going to tickthem off and then the credit union will be right there” to offerrelief.