Business Lending Doesn't Have to be Cost Prohibitive

In the Aug. 3 issue, you published a sidebar regarding business lending start-up costs. First, let me say thank you for shedding light on one of the most contentious aspects of business lending. Second, I'd like to disagree with the data cited. Pat Spencer is undoubtedly qualified to comment upon the costs that Baker Hill, as a software provider, charges. As one of the country's busiest commercial lending consulting firms, we see a very different picture. To begin with, a good, experienced commercial lender, regardless of the market, will cost more than $100,000 all told, especially if they have an established standing within the community. Second, this assumes that you can find qualified people. Many credit unions are having trouble simply finding experienced credit analysts and documentation staff. In addition, if your intention is to hire a complete department from another institution, often the cultural change can be difficult and the loyalty may be non-existent. Third, the figures for technology costs are widely variable. If a credit union's technology is up to date, the costs can be as little as 10% of the numbers cited. We have worked with a number of institutions who have spent nowhere near the $100,000-plus listed as the "low end" of technology costs, and yet have successful lending programs. Lastly, the article assumes that all of the activities will be borne in house. Clearly, the credit union industry is a proponent of outsourcing. A credit union that outsources none of its lending process would be rare, indeed. Business Lending is no different in this respect, than any other aspect of credit union banking. While you may not wish to outsource all of the process, especially in the beginning when volumes are low but trending upward, outsourcing some activity can provide immense cost savings. There are now enough firms in every aspect of the lending process that charge very reasonable, scalable fees that the figure of $250,000 is extreme, to say nothing of $500,000. Joanna Bruno President J.R. Bruno & Associates Glendora, Calif.