Credit Union Times asked leaders of some of theindustry's business lending CUSOs, “What will be the greatestchallenge and opportunity for credit unions and their businesslending programs in 2010?”

In 2010, credit unions will have an extraordinary opportunity tocontribute to our economy's recovery by supporting the capitalneeds of small businesses in more visible and meaningful ways thanin the past. Credit unions are uniquely well positioned becausethey have sustained lending capacity in part because ofcollaborative efforts that share cost and risk. Given the capitalchallenges of many banks, this will have unique importance in theyear ahead. However, most importantly, the extraordinary challengesof this economy require that all commercial lending credit unionsview portfolio risk management as the most critical priority facingthe health of their lending program both individually, andcollectively as an industry.

Bill Beardsley

President

Michigan Business Connection LC

Ann Arbor, Mich.

The greatest challenge, I believe, will be managing throughexaminer scrutiny of business loans, especially the larger ones.The greatest opportunity continues to be securing new businesses asCU members. This has resulted from the banks pulling back on theextension of credit.

Keith Reed

President/CEO

Cooperative Business Services LLC

Cincinnati, Ohio

The greatest challenge in 2010 for CUs with MBL programs will beto strengthen their respective portfolio management activitiesthrough more direct and meaningful contact with borrowers. Thismeans adopting calling programs that are based on perceived creditrisk parameters so as to ensure there is an early warning mechanismin place should borrowers encounter difficulties.

Conversely, the greatest opportunity in 2010 will be to forgeahead in building new relationships by aggressively positioningthemselves in the market as an alternative to the “big banks.”

Robert Cipriani

President/CEO

Octant Business Services LLC

Littleton, Mass.

Lending will remain tight in many banks. The poor performingbanks are internally focused on viability and many strong bankshave elected to sit on the sidelines. Positive media given to CUscontinues to inform an otherwise unknowing business public thatcredit unions are viable and willing providers of business credit.I anticipate sound financing opportunities will continue to growfor CUs in MBL as the economy slowly continues to improve.

Contrary to the thoughts of many, 2010 will be an excellent timeto begin an MBL program. Unlike a robust economy where thecompetition is plentiful, 2010 will be a time of limited businessloan providers. Demand for MBL is greater than the supply allowingCUs to select the lending opportunities they wish to pursue withoutthe pressures of a business member waving multiple loan offers infront of them.

There is no pricing pressure in today's environment as there isin a robust economy. In today's environment, CUs can make solidasset-liability decisions relative to MBL pricing rather than beheld hostage to market conditions. In a strong economy,particularly when the supply of MBL providers exceeds the demandfor MBL, there is an ever present downward pressure on pricingbeyond what may be financially viable.

All the nonperforming MBL loans in the news today were extendedtwo, three and four years ago. No one-business or consumer-ismaking bad loans today. Vigilance is far too great. Creditstandards are very high, requests are reviewed multiple times priorto approval, all of which provides little opportunity for poorcredit to be approved.

Starting in this environment, CU MBL personnel can see theresults of loose MBL underwriting standards and aggressive lendingdecisions produced in a booming economy. The end result years downthe road has proven to be very ugly. If a CU starts in that sort ofrobust economy, they may not fully realize the underwritingstandards for MBL have been greatly relaxed by some, andconsequently the negative effect it can have on their CU down theroad. The United States has not seen a down economy in over 15years. Banks and CUs have lending personnel considered seasonedthat have never seen what happens when the economy goes south. Ithas been a learning experience for many. Isn't it better to startnow that the real MBL training has begun?

As MBL activity increases, particularly among businesses thathave not traditionally sought loans from CUs, so will the productsand services related to MBLs. Demand for business share accounts,business credit cards, remote capture, online banking, and relatedproducts and services will increase.

With vacancy rates increasing in many CRE types, downwardpressure is being created on lease rates. Loans approved at priorincome streams may no longer be valid. CUs will need to be vigilantabout lease terms, maturities, renewals, and the effects on netoperating income these changes may have. Decreased lease rates willresult in lower CRE values thereby effecting LTV. CUs will need todisplay strong lending discipline and not fall victim to the issuesfaced by banks in CRE, particularly as banks encourage their CREloans to go elsewhere. CRE will be a viable loan type for CUs in2010, but expertise in CRE lending will be essential to maintaininga strong MBL portfolio.

Increased regulatory requirements for MBLs seem almost certain.How much will be enacted in 2010 remains to be seen, but with MBLdelinquency exceeding consumer/retail delinquency in the CUindustry combined with explosive growth since 2000, the NCUA isbound to tighten.

E. Michael Gudely

President/CEO

Innovative Business Solutions

Columbia, S.C.

I believe the biggest challenge for 2010 will be portfoliomanagement as the commercial market continues to decline and tryingto work with those members that can survive and aggressivelycollecting on those who won't. It looks like the examiners aregiving some good guidelines on how they would like to see workoutshandled. The opportunities for 2010 are great because the banks arecontinuing to contract their lending. There will be good loans thatthe credit unions will get an opportunity to look at that wouldn'thave happened in the past.

Mark Bostock

President

Centennial Lending LLC

Longmont, Colo.

It seems inevitable that one of the major challenges faced bycredit union business lending programs in 2010 will be maintainingand controlling asset quality as businesses and consumers strugglethrough what has proven to be the worst economic downturn since theGreat Depression.

On the other hand, credit unions are in a rare position tobecome more prominent providers of services to businessesthroughout the country as most commercial banks continue to focustheir efforts on addressing loan problems and away from funding newopportunities and serving existing well-performing businessrelationships. The key to taking advantage of this opportunity willbe the ability to attract the business relationships that arefinancially strong and well managed.

Daniel Bleil

President/CEO

Spectrum Business Resources LLC

Lisle, Ill.