The Power of the MBL CUSO Demonstrated at PALS Workshop

SAN FRANCISCO-Arrowhead Central Credit Union is a prime example of how a Credit Union Service Organization can boost a member business lending program. In 1996, Arrowhead began offering member business loans and over the next five years made $17 million in loans. After launching its CUSO, Member Business Services, Arrowhead had $19 million in business loans in just the second half of 2001, Member Business Services CEO Steve von Rajcs explained during the recent Partnering and Leadership Successes workshop. By 2002, there were $49 million in loans, including $13 million in participations, and business deposits increased by $10 million. In 2003, Arrowhead added $41 million in business loans on the books with $1.5 million in participations and an $18 million increase in deposits. This provided the $740 million credit union a 6.5% yield. According to von Rajcs, forming the CUSO had a number of advantages. It helped to diversify the credit union’s income sources, diversify its portfolio and earnings, and it helped grow deposits. To run a successful member business services operation, von Rajcs recommended that credit unions offer three to four different types of checking accounts; money market, savings, and CD options; merchant bankcard services, payroll services; business check ordering; courier, armored car, and cash vault services; and account analysis. On the loan side, credit unions should provide real estate loans, vehicle loans, machinery and equipment loans, lines of credit, Small Business Administration loans, and corporate VISA cards. There are definitely risks to business services as well, von Rajcs said, so strong underwriting is crucial. The credit union also has to be willing to commit adequate resources to the program, he said. Documentation software, analysis software, SBA loan software, credit bureau access and core systems to support the member business lending program are essential. [email protected]