PCUA's CU BizSource Facilitates First Loan Participation

HARRISBURG, Pa. – Three months after it passed its pilot test and was officially launched, CU BizSource, a member business services product offered through the Pennsylvania Credit Union Association’s service corporation, made its debut as a conduit between two credit unions participating in the CU BizSource program. The loan participation involved Mennonite Financial FCU and Century Heritage FCU, two of the six credit unions participating in CU BizSource. Mennonite Financial, the “lead credit union” sold a 90% share of its member’s loan to Century Heritage FCU, the “participant.” CU BizSource performed the credit analysis for both credit unions and provided them with the complex loan documentation, including the participation agreement. Mennonite Financial President/CEO Larry Miller said the total amount of the business loan was confidential, but he said it was for commercial real estate. The $37.8-million MFFCU has been making business loans for about 10 years for a variety of purposes such as lines of credit, real estate secured and titled properties such as trucks. It currently has about $5 million in its business loan portfolio. MFFCU participated out its business loans before, but Miller said the credit union had to “figure out a way to do the credit analysis because credit union data systems aren’t used to handling commercial loans.” That, he said, was the main reason the credit union decided to use CU BizSource to help them participate out the latest business loan. “CU BizSource’s system can automate the credit analysis and save us a lot of work,” said Miller. As part of the arrangement, CU BizSource will credit each of the CUs with their pro-rata share of the incoming monthly payments from the member business. It will also provide the two credit unions with monthly reports identifying their pro-rata share of the loan balance and any monthly transactions. CU BizSource is designed to be a one-stop source for credit unions’ small business lending needs. Besides handling the underwriting, document preparation and loan servicing, CU BizSource also offers 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 the administration of loan participation. Miller said Mennonite Financial FCU has other participation loans in the pipeline with CU BizSource. The other four credit unions participating in CU BizSource are AmeriChoice FCU, USSCO Johnstown FCU, Cornerstone FCU, and Cross Valley FCU. -