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WASHINGTON – Although there were a record number of member business lending startups in 2004, the loans still only capture a small percentage of the loan portfolio. MBLs account for only 2.7% of all credit unions’ loan portfolios, according to Callahan & Associates, Inc. But as of the third quarter of 2004, they grew on average 23% for the industry over 2003 to reach $11 billion. There are currently nearly 84,000 loans and of the 1,985 CUs with more than $50 million in assets, 32 started business lending programs last year. Credit unions are not walking into MBL programs blindly as evident by the experienced lending staff they’re hiring, noted Tom Geggel, industry analyst at Callahan. “Determining how to staff the business lending program is critical to its success,” Geggel said. “While federal regulations require officers to have at least two years of experience in commercial lending, most employees have a banking background with several years of experience. Several credit unions also have ongoing training programs for employees.” While business loans have a 60 basis point higher delinquency rate than the overall loan portfolio, the gap is shrinking from a high of 200 basis points in 2001, Geggel pointed out. However, with proper underwriting and selection of the loans, business loans are strong investments, he added. “Before moving ahead with a business lending program, credit unions need to develop institutional support, hire the right staff and account for risk factors,” Geggel reiterated.

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