Member Business Solutions Celebrates $100 Million in Loans, Encouraging Credit Unions to Tap Still Growing Lending Market

DULUTH, Ga. -- Having just marked its two-year anniversary, Member Business Solutions, LLC is growing faster than it expected, recently reaching the $100 million in loans underwritten milestone.

Launched in September 2004, MBS is jointly owned by Georgia Central Credit Union and Southeast Corporate Credit Union. The CUSO offers an array of lending services and merchant processing, deposits, payroll and other services through Bankers Systems, Inc., CompuPay and TermNet Merchant Services, Inc., respectively.

"We're thrilled to have achieved this milestone, especially because this tells us that the service has made an impact with credit unions," said Jim Gallagher, president of MBS. "They are realizing their potential to serve the small business market, and they are succeeding."

Gallagher said nationally, credit unions have grown their business lending portfolios by more than 100% over the past three years, yet this corresponds to less than 1% of the small business market, which itself is growing by 14% annually.

"This represents a tremendous opportunity for credit unions," Gallagher said.

MBS serves 36 credit unions in eight states in the Eastern region of the country. The credit unions' asset sizes range from $30 million to $4 billion, a sort that surprises Gallagher, who initially thought the "sweet spot" would be those with $250 million in assets. On the loan end, half of all MBS' loans are under $50,000 and half are over that amount with the average hitting the $250,000 mark.

"Rightly so, credit unions are doing a great job of servicing the small business," Gallagher said. "Beyond that there are a lot of real estate loans [being serviced and underwritten by MBS]."

Indeed, most of the real estate loans are in the multi-million dollar range, Gallagher pointed out. But that hasn't impacted credit unions that are still helping members with the smallest of loans. For instance, at press time, MBS had just completed a $2,000 loan, but last month, the CUSO serviced a $10 million loan.

Meanwhile, the industry can almost cherry pick from the growing number of business lending and services CUSOs that continue to sprout. Some larger CUSOs place greater emphasis on selling ownership into the operation while others play up loan participations. Gallagher said what sets MBS apart is its corporate-credit union ownership.

"The fact that we're owned by two corporates gives a lot of credit unions comfort about the services they receive from us since [many of them] tend to go to their corporates for other services," Gallagher said.

MBS' success is also directly tied to the CUSO's professionals, who have combined for over 20 years of experience in underwriting and more than 15 years in the processing field, he said. That expertise is important to credit unions that want to offer members business loans, but are stymied.

"The main hurdles we've heard from credit unions are that they couldn't afford to hire the right personnel and the underwriting," Gallagher said.

Credit unions have the option of having a dedicated sales force through MBS or not. Half of MBS' clients use the former approach, but Gallagher is looking to encourage the other half to consider it going forward to bring in more loans. The smaller credit unions tend to need less underwriting and more consulting, he noticed. Still, he understands that all credit unions don't fit a cookie-cutter model.

"Everyone measures success differently. Some credit unions may not what to have so many loans."

In the two years since its launch, the biggest challenge has been managing growth. The CUSO signed on five credit unions in its first five months and continued to add more at a healthy clip, Gallagher said. The problem is credit unions of all sizes have generally been slow to do business loans. Half of MBS'clients are active with loan volume, but others have been "very deliberate and methodical in how they've begun the lending process." It's not a complaint, just an observation, he noted.

"I've talked with ex-bankers at other CUSOs and they say the same thing," Gallagher said. "They're used to doing $100 million loans."

Another challenge that MBS has addressed is the costly implementation of information technology systems, with Gallagher describing the process as an "expensive, black hole that can suck money away." The CUSO has designed its own systems and partners with vendors that have the expertise to make it all happen.

Looking ahead to 2007, Gallagher said he still would like to see more of MBS' credit union clients add the dedicated sales force, which he considers it to be "the single determinant of loan success." He also wants to add another 14 credit unions to the client listing and triple loan volume by the end of next year. The CUSO will continue to concentrate on building its client roster on the East coast because its corporate-owners have a more southeastern presence and it might be cost prohibitive to hire staffers to serve credit unions in other time zones. Just as important, there's a lot of business to go around right in MBS' backyard.

"Our focus from the start has been 'what does a particular credit union need,'" Gallagher said. "We realize we need to help from start to finish." --msamaad@cutimes.com