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AUSTIN, Texas – Budding entrepreneurs are quickly realizing that Austin is starting to become one of the more “small business friendlier” cities in the nation. To accommodate them, seven Texas credit unions have partnered to bring business lending and deposit services to its members and beyond. CU Business Solutions is the name of the new CUSO and its seven owners are $461 million A+ FCU; $358 million Austin Telco FCU; $216 million Greater Texas FCU; $366 million IBM Texas Employees FCU; $40 million Texas Health CU; $671 million University FCU; and $497 million Velocity CU. All of the Austin-based credit unions are familiar with working with one another having linked up before through a shared ATM network, said Kerry Parker president/CEO of A+ FCU. The idea made sense given that, with the exception of University FCU which started offering business loans in 2002, none of them had the expertise or resources to strike out on their own, most acknowledged. “For us, working together, we’re able to get something up sooner than we would have individually,” Parker said. At this point, loan financing amount minimums will vary with each credit union, Parker said. As for SBA lending, each respective credit union will have to pursue becoming a lender on its own. University FCU became an SBA lender in the fall of 2004. Business deposit services will also be offered, Parker said. The CUSO is scheduled to open in September or October. According to the SBA, Austin was recently recognized as one of five cities in the country for its innovations in entrepreneurship. Innovation was measured by factoring in research and development expenditures, number of patents and hi-tech’s share of the local economy. Austin ranks in the top five along with Fort Collins, Colo.; Raleigh, N.C.; Provo, Utah; and Boston. Austin’s small businesses will also get another financial boost. In early July, the Texas Certified Capital Co. (CAPCO), a state economic development program designed to encourage business growth, received $23 million from Advantage Capital Partners, an equity and venture capital firm. Small businesses continue to provide Texas’ largest source of new jobs and a constant stream of employment opportunities for minorities and women, according to the SBA. For University FCU, which started offering business loans in 2002, the timing could not be better. Since 2002, the credit union has amassed 309 business loans totaling $15 million, according to James Nastars, senior vice president of lending. Partnering with his six comrades just made economic sense. “We see it as a way to streamline some of our back office (functions) and get economies of scale,” Nastars said. “It also will help to develop a local network of loan participations. We’ll have someone who really understands the local market economy.” Austin Telco FCU had some experience on the business deposit side having opened more than 1,000 business checking accounts for everyone from Avon cosmetic representatives to fairly large companies, said James Poplin, president/CEO. However, members were asking for lines of credit and business loans. “A lot of them were hesitant to move their business (banking) from their banks,” Poplin said. “We have some of them that really want to move everything over right now.” A+ FCU is also seeing pent up demand, Parker said. “There’s a member who is a real estate developer who wants to move from his bank, but he’s waiting for us,” Parker said, adding the credit union actually bought one of their branches through the developer. Roughly 2,000 of Velocity Credit Union’s members own their own businesses, said Larry Strong, president/CEO. They range from the firefighter with his own pest control business to the owner of a bakery to a member who just opened a wrecker service. “Quite frankly, we just didn’t know how to do (business lending) by ourselves,” Strong said. “When we talked to consultants about it, they said it was a must that the commercial lender be experienced” with a specialty in small business, real estate and “big time” commercial lending. A search is already underway for office space and a professional to serve as president of CU Business Solutions. Additional staff, possibly up to four employees, may be hired by the new executive in the short term, Nastars said. Texas has been a hotbed of activity lately with attempts by $1.4 billion Community CU and $1.2 billion OmniAmerican CU to convert to mutual savings banks. In May, Dick Ensweiler, president/CEO of the Texas Credit Union League, testified during a House Financial Services Subcommittee that the regulatory relief provisions contained in the Credit Union Regulatory Improvement Acts would dissuade some credit unions that feel they are bumping up against the 12.25% business lending cap from converting to mutual savings bank charters. Meanwhile, some Texas community banks have been very vocal about their disapproval with credit unions and their business lending entry. Surprisingly, Strong is sympathetic. “I feel sorry for community banks and middle-sized credit unions because big bankers are buying them out and we’re seeing a lot of credit union mergers,” Strong said. Still, “Austin is growing like a weed. I think community bankers will keep their customers and the ones that are with us will stay.” In the same breath, Strong said NCUA should give credit unions a little bit more leeway in business lending pointing out that the agency was nervous when share drafts, CMOs, indirect and subprime lending first came out. “NCUA should understand that we will do due diligence before getting into new areas,” Strong said. “If we’re to grow and stay healthy, our regulator needs to deal with us individually and not overall like a shotgun effect.” [email protected]

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