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ORLANDO, Fla. – Member business services seems to be on all credit unions’ minds these days – credit unions that don’t offer member business loans and related services want to know if they should, and those that already do are looking at ways to expand their menu of business services. The level of interest in offering business services was apparent from the comments and questions posed by the audience to a panel of CU representatives from credit unions already involved with member business services during a small business open forum held during CUNA’s Symposium. The panel, moderated by CUNA VP of National Marketing Kevin Lytle, included representatives from credit unions that are members of CUNA’s Business/SEG Services Committee: Grace Mayo, CEO, Telesis Community CU; Gordon Dames, CEO, Mountain America CU; Charles Grossklaus, CEO, Royal CU; Paul Mercer, president, Ohio Credit Union League; Bob Hoefer, CEO, Dupaco Community CU; and Reed Prevatte, vice president of business services, Truliant FCU. For those credit unions that still wonder whether there is a market for them to offer business services to, Lytle said they only have to look at credit union demographics and statistics collected by the committee – credit unions serve about 250,000-300,000 select employee groups, and of these about 150,000-200,000 are small businesses. In addition, about 10% of small businesses change financial providers each year. Moreover, Lytle demonstrated, results of an online survey conducted by CUNA to assess credit unions’ involvement with member business loans, showed that more than half of the survey respondents indicated they didn’t offer member business loans. In addition, 38% of responding credit unions indicated they had to refer members elsewhere for business loans because they didn’t offer MBLs, and 13% said it was because they didn’t offer a specific product or service such as business checking the member wanted along with an MBL. To those credit unions that consider themselves too small to offer member business services, Mercer said, “Member business lending is a progressive credit union opportunity regardless of the size of a credit union.” Because of the relative small size of credit unions in Ohio, Mercer said only a handful of credit unions in the state are capable of independently making MBLs on their own, “but that hasn’t stopped them from making them. Member business services should be a credit union movement-wide initiative.” While all the panelists’ credit unions got their feet wet in business services by offering member business loans, they concurred with Prevatte who said, “Lending is just a piece of what these businesses need.” Truliant recently introduced a Visa check card, and the CU plans to launch a business credit card within the next 30 days. Other credit unions like Royal CU, also offer business deposit accounts. The $575 million RCU has been making business loans for about 21 years. Its ROA in business lending, said Grossklaus, is 2.79%. It currently has 1,265 business loans on its books, and its business loan portfolio is $145 million. “It’s not just about real estate and auto loans, it’s about helping members grow their lives,” said Mayo. Telesis CCU through its CUSO, Telesis Partnerships Inc., has been involved in offering business services for 10 years. Over that time, Mayo said the CUSO has underwritten more than $700 million business loans. In addition to offering MBLs, the $248 million TCCU also offers business money management accounts, business certificates and business savings accounts. Other panelists’ credit unions like Dupaco Community CU also offer trust services besides MBLs. “Starting a business is a stage of life for some people, and we want that relationship with them. To have that, you have to be able to offer them a total package of business services, not just lending,” said Hoefer. DCCU has been involved with business services since 1985. Dames said Mountain America has been doing MBLs for about 20 years and currently has 10% of its total loan portfolio in MBLs. The credit union is in the process of expanding its business checking account services. While the panel participants encouraged credit unions to get involved with offering business services, they also pointed out some pitfalls of member business lending and things credit unions should be aware before they dive in to offering business services. “Member business lending touches every part of a credit union, from the software to training your member services representatives,” said Truliant’s Prevatte. Over the past six months since Truliant has gotten its business services offering off the ground, Prevatte said the credit union has spend about a quarter of a million dollars in resources. He encouraged credit unions to have a system in place for check kiting and to be thoroughly familiar with the federal and state – if the CU is state-chartered – rules and regulations concerning member business lending. Dames agreed. “You have to constantly fight regulators’ misperceptions about credit unions’ ability to do member business loans.” All the panelists concurred that safety and soundness is critical. “Even if there were no federally mandated 12.25% of assets cap, there would still be limits that each credit union should develop internally for good prudence and liquidity management,” said Mercer. The panel also encouraged CU directors to sit in on business loan meetings so they’ll better understand their CU’s business loan process. In addition, many directors have contacts with businesses in their community and credit unions should leverage that. Following the panel session, CUNA’s Business/SEG Services Committee met with key service providers to hear what the providers need to develop software and other resources for credit unions to attract member business accounts. Attending the meeting were representatives from Summit, EDS, Symitar, Bankers System, Harland, Baker Hill, CUNA Mutual, and corporate credit unions, said Lytle. The committee has already published for credit union use its Business Services Manual, and it plans to release CUNA’s “Guide to Federal Agencies Serving Member Businesses,” a compilation of small business lending programs that federal agencies such as the SBA, Treasury and HUD, offer. In the first quarter 2003, the committee plans to create national voluntary guidelines and best practices for credit unions and service providers. -

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