HARRISBURG, Pa. – After several months of pilot testing a new member business services product among six affiliated credit unions, the Pennsylvania Credit Union League has launched a new program called CU BizSource for CUs' small business members. CU BizSource is being offered through the league's service corporation, PACUL Service Corp. It is designed to be a one-stop source for credit unions' small business lending needs. In addition to providing expertise in underwriting, document preparation and loan servicing, CU BizSource is also offering online information retrieval; periodic training classes for CU staff in business lending; support with regulators; aid in formulating a lending policy; a best practices manual; phone support; and administration of loan participations. League Vice President David Dunn said there has been a "perceived demand" for small business lending services among credit unions in the state, but credit unions haven't offered the services themselves either because they don't have the internal expertise or they haven't been able to afford to build their own commercial loan department. "There is a tremendous need for these types of services. Small business members are coming into the credit unions and are asking for help," said Dunn. The six credit unions that participated in the pilot were: AmeriChoice FCU, Mechanicsburg; USSCO Johnstown FCU; Cornerstone FCU, Carlisle; Cross Valley, FCU, Wilkes-Barre; Mennonite Financial FCU, Lancaster; and Century Heritage FCU, West Mifflin. The pilot ended Jan. 1. Dunn said the credit unions were selected because they all either had "some level" of experience with commercial lending or they had people on staff who had experience in commercial lending. "That gave us a leg up in dealing with them since they were familiar with business lending language," he said. CU BizSource isn't the Pennsylvania League's first venture into providing commercial lending services to credit unions. League COO Robert Hinchey said a few years ago, the league tried offering the services through the National Cooperative Bank. The arrangement didn't work out, said Hinchey, because NCB wanted to portfolio the loans themselves. Credit unions also complained that they wanted to deal with someone local (NCB is located in Atlanta, Ga.). Dunn is familiar with the demand for business lending services among small businesses. Prior to coming to the PACUL, he worked for a large bank and a smaller community bank. He witnessed banks go through mergers and acquisitions, and as they moved to from a service to a sales culture, "they abandoned small business owners. They're not interested in making small commercial business loans," he said. "There's a market that's going underserved, and when I came to the league, I saw an opportunity for credit unions to serve it," said Dunn. What's unique about CU BizSource, Dunn emphasized, is that the program calls for the sharing of responsibility for the business loan between the credit union and CU BizSource, and the loan stays in the credit union's portfolio. Under the program, when a small business member applies for a member business loan, the credit union conducts the initial interview with the borrower and gathers the necessary information for a credit analysis. The credit union then sends the information to CU BizSource which underwrites the loan according to the credit union's specific loan policy based on what the credit union determines is acceptable collateral. CU BizSource subsequently provides the CU a credit analysis including a credit score based on an eight-level risk rating matrix, in the form of a Loan Request and Credit Memorandum that includes an executive summary, transaction outline, and a comprehensive financial analysis that includes documents such as a balance sheet and income statement; cash flows; analysis of leveraging; comparisons of industry average; and ratio analysis. "The narrative format helps the credit union with limited expertise in business lending read through it and see the credit quality of the loan," said Dunn. Once the loan is closed and funded by the credit union, the CU in turn forwards the information to CU BizSource for loan and portfolio administration and servicing including commercial portfolio servicing, member business billing, payment application and comprehensive reporting. For now, Hinchey said CU BizSource will concentrate on member business lending, "but we're sure at some point in time we'll get in to other services, such as employee benefits, if we see there's a need." Dunn offered there are two types of credit unions when it comes to offering member business services – first there are credit unions that know they have to get involved with the services but don't know the marketplace or meet NCUA's expertise requirement, although they're willing to hire experts. Then there are those CUs that "know member business services were on the radar screen, have educated themselves, and have a sense of what's going on with business services." CU BizSource is here to service both types of credit unions' business lending needs, said Dunn. -

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