Despite the temptation of potential revenue, CU Business GroupLLC CEO Larry Middleman advised credit unions to rethink businessloans that may not be worth the trouble.

“Don't give in to the temptation to make a loan that should notbe made, just because of the high yield and loan fees,” Middleman told attendees at CUBG's National Business ServicesConference in Portland, Ore., on Monday.

Middleman said two key factors for successful business lending are always following prudent underwritingpractices and spotting the early detection of problem loans. Creditunions should also keep up with annual reviews, he offered.

With more than 150 attendees at CUBG's conference this week,which is a record, according to the business lending CUSO,Middleman said the high turnout may be a sign that credit unionsare in need of growth and diversification opportunities.

“The industry has advanced considerably in business services,”Middleman said. “But we are all still relatively new in trulyserving businesses in the full-service manner they need.”

During a presentation on trends in business lending, Middlemansaid between 2009 and 2011, credit union business loans increasedby 13% while bank business loans decreased by 4%.

“Business loans at community banks with less than $1 billion inassets dropped by $79 billion or 19% over that three-year span,”Middleman pointed out. “This paints a clear picture of the need forcredit unions to fill that gap and serve their members andcommunities.”

Credit union business loan delinquencies as a percentage ofmember business loans (5.16%) in 2011 were higher than thebanking industry (3.71%), Middleman said. He attributed this tobanks' willingness to recognize problem loans sooner and takeappropriate action.

“At the start of this recession, many credit unions wanted to'hold on' and wait for things to improve. That turned out to be thewrong course of action in many cases.”

Middleman said the good news is that credit union chargeoffs asa percent of MBLs (0.78%) in 2011, were still lower than banks(0.82%). Over the past five years, credit union MBL chargeofflevels have never been as high as chargeoffs in the bankingindustry, he added.

CUBG's business loan delinquencies as a percentage ofoutstanding member business loans was 1.56% and MBL delinquenciesstood at 0.24% as of March 31, according to the CUSO, which servesmore 397 credit unions in 43 states.