To participate, a credit union would loan money to the CUSO at 4% for 48 months. Financu provides a loan at 12% for 48 or possibly 60 months, Mossman explained. The operator then purchases the equipment lease to the casino for seven years.

New machines cost $18,000 and can be paid off between 22 and 28 months. There is a seven-year lease with an opportunity to renew for another seven years. According to Mossman, the life of the equipment is between five and 10 years and the machines can be readily upgraded.

Mossman said the machines bring in, on average, $130 per day. On the strip in Las Vegas, it's $169, and in Pennsylvania, where he's based, the amount is $258.

“We have better than average returns and it provides the ability to diversify the portfolio beyond real estate,” Mossman said. “There's a relatively short time investment horizon at 48 months. There is also a huge market for used equipment and slot machines. In South America and Asia, they're exploding with used machines.”

Mossman said 60% of casino revenue comes from slot machines, with regional and tribal use accounting for the highest industry growth. Some operators lease the actual felt on games such as Texas Hold'em poker. Financu isn't doing this type of financing, he added.

Casinos are highly-regulated industries, Mossman said.

“Every day, operators have to report earnings to the state. Any loans we make to any operators, we know the cash flow that's operating on a daily basis. It's all public data,” he said.

Some may view slot machines as risky business. Mossman said to manage risk, Financu has a full-time chief credit officer, 90-day intensive due diligence, a tribal lawyer on staff, and the program is in compliance with all NCUA regulations. Four percent of funds are taken in for loss reserves, he said.

After meeting with a business partner who wanted to raise capital for niche financing, Mossman said he consulted with Guy Messick, a partner with Messick & Lauer PC in Media, Pa., who specializes in legal consultation for existing and startup CUSOs.

Messick, who attended the NACUSO breakout session, gave the nod after conducting his own assessment.

Financu is currently seeking credit unions to invest in the CUSO. Those in the first tier can have 20% equity in the CUSO, above-market interest rate returns, a share in the profits, board seats, investment guidance and must maintain a minimum level of loans, said Mossman, who is pictured at left.

The second tier is for those credit unions that are just seeking above-market interest rate returns.

CU Times asked one lending veteran who attended the breakout session what he thought of Financu's slot machine leasing program.

“You would think this type of business would raise all kinds of red flags but on the surface, it looks like it could work,” he said.

Mossman said later this year, Financu plans to open up opportunities in solar projects, bulk food and small equipment financing.

Another firm exploring relatively new territory is QuarterSpot, which provides business loans for amounts smaller than traditional financing with shorter terms. The loans are can be offered without personal guarantees or credit checks, according to the company. All underwriting decisions are based on the financial health of a business and its ability to repay a loan.

Loan amounts start at $5,000 and go up to $150,000. The average loan is $35,000, said Adam Cohen, chairman and CEO of QuarterSpot.

Right now, he said he's seeing more loans in the $25,000 to $100,000 range. The typical term and where most of the demand is occurring is between six and nine months; however, the company has done three-month terms, he noted. Amortized interest rates can reduce borrowing costs by as much as 85%.

“We don't require personal guarantees, but that just allows credit unions to extend the scope for your members,” Cohen told attendees. “We can do renewals and the proceeds from the loans can be used to pay off debts.”

QuarterSpot is also looking to partner with credit unions, Cohen said. The company can provide a link on its site to a credit union's site. A referral fee is paid to the credit union or CUSO partner, and they are given a choice to charge between 1% and 3%. QuarterSpot also provides marketing communication packages on its small business loan program for credit unions to share with members.

When QuarterSpot launched its online business lending platform last June, Cohen said even though small businesses employ nearly half of America and account for half of GDP, most cannot get a bank loan.

“They are often forced to accept extremely high rates and fees from alternative sources, and owners risk losing their personal belongings and damaging their personal credit if things don't work out,” Cohen said at the time.

One long-time niche lender is the National Cooperative Bank based in Washington. Created in 1978 under the National Consumer Cooperative Bank Act, the entity has $1.8 billion in assets, and $5.7 billion in assets under management when combined with the assets managed for all of its investors, said Patrick Connealy, senior vice president.

Solar projects have been one of NCB's key niches for years. The cooperative bank has $10.5 million in solar loan participations with a credit union California, and $225 million in commercial real estate participations with credit unions in the Golden State as well as in Alaska and Arizona.

Other core niches include community-owned housing, community-driven healthcare, retailer-owned grocers, small business co-ops, and consumer-owned credit unions and CUSOs, Connealy said.

Of the NCB's total deposits, 35% or $616 million comes from credit unions, he pointed out. More than 650 credit unions, leagues and CUSOs are partners.

Agricultural co-ops, warehouse lines of credit for indirect auto loans and residential loan sales and participations with CUSOs and credit unions in California, Georgia, Michigan and Maryland continue to be strong drivers too, according to Connealy.

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