U.S., Canadian credit unions share MBL concerns, interests

<p>NEW WESTMINSTER, B.C. – Credit unions in Canada don’t face the same small business lending restrictions as U.S. CUs, and have been at it longer than CUs here. Their business lending strategies and concerns though, are very similar to those of U.S. credit unions. Westminster Savings Credit Union has been involved in business lending since the mid-1980s and has been so successful in competing against Canadian banks for business accounts, the CU is planning to expand from two to four commercial offices in the next few months. Judith Lougheed, WSCU commercial lending manager, notes most credit unions in British Columbia offer business services. WSCU has (C)$1billion in assets and its business lending portfolio is (C)$200 million. What does it take to succeed in business services? “People are the most important thing,” Lougheed answered. “That’s been a problem for credit unions, they have difficulty finding the time to train someone to the point where they’re effective. So what we often do is steal (employees) from the banks. “You need people not only with the proper training, but with the discipline and skills that let them be off almost semi-independently from the credit union,” she added. Although business lending has traditionally been a stronghold of banks, Lougheed believes credit unions can bring certain advantages to the table. “The competitive edge we seem to have over the banks is decision-making is local, which means, first of all, it’s speedier. Secondly, there’s a much greater appreciation of local conditions,” she said. “That’s especially true in real estate project financing. A bank may have to go to someone in Toronto or quite far away who really doesnt have a clue whats happening in this market.” Even though quick decisions are important to businesses as they are to retail consumers, Lougheed suggests businesses owners understand due diligence takes time. In retail lending, members are likely to put price on the top of their list. On a business person’s ranking, it’s fourth or fifth. They are likely to award first place to the relationship they have with their account manager, and the flexibility needed to match their needs. The credit union is probably prepared to take on a little bit more risk, Lougheed said, or at least what’s perceived by banks as risk. For example, WSCU will often finance up to 75% of a commercial project whereas banks will rarely venture beyond 55%. About the only way to market the credit union advantage to business is through word of mouth, Lougheed said. She doesn’t think glossy ads do much. You need a network of customers and referral sources plus high-profile employees in the retail branches who are willing to refer business to the commercial specialists. Jax Navy Credit Union in Jacksonville, Fla. has been offering business loans for a little less than a year, but already the $2 billion CU has learned some valuable lessons. It’s been working to win small business accounts. Skim JNCU’s Business Services brochure and you’ll see products such as business term loans, commercial mortgages, business checking accounts, non-profit association checking accounts and direct deposit of payroll services, plus business investment services through Jax Navy Financial Group. Kathy Bonaventura, senior vp/lending, explains business loans are a small but growing portion of Jax Navy’s lending business. The commercial lending department opened in June 2001 and the first business loan closed in September, so it’s a relatively new endeavor. However, there are already 2,000 business accounts opened by existing members as well as by businesses new to the credit union. “It’s a very good mix,” Bonaventura said. “It was something our members really wanted. That was the driving factor, although of course we are always looking for new opportunities. We researched our market area thoroughly. “What was the competition doing as far as lending and deposit services? Did we have something to offer? If so, what? You can develop a program, but if it’s not better than the competition or doesn’t offer a reason to bring people over, you’re not going to have a lot of success,” she continued. With interest rates low, JNCU saw an opportunity to refinance existing commercial buildings. JNCU felt being a credit union brought a unique relationship to the mix, and a better deal on fees and interest rates on both the lending and deposit side. The credit union also positions itself as very service-oriented whether an account is a retail or business account. The credit union has tried to make all members aware through its monthly newsletter that Jax Navy does provide business services. In addition, the credit union is calling officers who are active in the business community and visiting business owners to alert them to what the credit union offers. To succeed in commercial lending, Bonaventura believes a credit union needs a reasonable mix of deposit as well as loan products. The idea is to build a total relationship with business owners who don’t have time to run from one financial institution to another. -</p> <p>[email protected]</p>