How do you view the growth of your credit union? There are a few perspectives: portfolio, membership, or share of member financial services. So often the people in their communities need capital to start or grow a business, and the credit union has what the community needs. That’s why commercial lending has become an essential part of credit unions’ growth strategy.
Indirect and residential lending present their own challenges, but commercial lending is unique. Underwriting business loans brings a different set of variables and consequently a different risk profile. The questions are: how can I continue to make prudent investments of member assets, manage the risk AND serve the business needs of members and the community? How can I serve and grow?
Your Growth Plan
First, there are a few basic questions to consider about your growth.
- How many loans have you planned for?
- What average loan size, and range of loan sizes do you expect?
- What type of commercial lending is right for your community?
- How will you reach prospective members?
- How many new members do you plan to gain?
- Do you have the skills in your organization to effectively underwrite business loans?
- And here’s the big one; what’s your appetite for risk?
Guidelines & Underwriters
Guidelines are important to you, your board of directors, your members, and even the community. But you might be surprised by the number of credit unions that have been making business loans without documented or poorly followed guidelines. What could go wrong? I’m guessing you can imagine. . . The bottom line is that lenders must know the likelihood of repayment, whether collateral exists and what it is worth relative to the value of the loan. That’s why there are guidelines!
Even with the best guidelines, it is important to remember that there is a person implementing the guidelines, and your success relies heavily on the underwriters. To experience growth, serve your membership and limit risks, underwriters need experience, discipline, curiosity, personality, and detail orientation. If growing your credit union in portfolio size and strength, gaining more members, and serving more of your community is important to you, then having thorough guidelines and great commercial underwriters are essential as well.
From strategic planning to loan processing to quality control
, Analytic Focus’ commitment to excellence can be applied to your credit union’s commercial channel in a number of ways:
- Lower operation costs of a business lending department
- Increased expert commercial underwriting resources
- Identification of potential risks in your portfolio
- Customized Quality Control solutions to reduce loan loss reserves
As an expert in the commercial lending arena, Analytic Focus can help your credit union build and implement a custom strategy to pursue a profitable commercial lending channel. As a partner, we seek to optimize your credit union’s profitability and empower you to serve your credit union’s membership base.
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