ST. LOUIS - Certain that there was a market for it after nearly two years of in-depth canvassing of the small business landscape, the Missouri Credit Union Association and Missouri Corporate Credit Union are poised to launch a business services CUSO. Heartland Business Services, LLC, which will initially offer a variety of business loans, is expected to be up and running by the third quarter, said Jim Ahearn, the CUSO's interim manager and MCUA's senior vice president, credit union support services. Along with MCUA and Missouri Corporate, eight credit unions have signed on as co-owners: $682 million Anheuser-Busch Employees CU; $80 million Electro Savings CU; $302 million Mazuma CU; $143 million Midwest United CU; $106 million Mizzou CU; $158 million St. Louis Postal CU; $443 million Vantage CU; and $81 million West Community CU. A plethora of business loans will be offered including SBA loans, lines of credit, commercial real estate, inventory, equipment and more. Heartland will be open to credit unions of all asset sizes with loans ranging from $50,000 to $1 million. The CUSO will also serve credit unions outside of Missouri as MCUA has relationships with those in Illinois and the eastern part of Kansas. "We knew there was a market but we just had to quantify it," Ahearn said. With the assistance of the Armstrong Group, a Virginia-based consulting firm, the seven-member CU task force formed in 2003 to kick off the effort, discovered where the small business owners were in the state, got feedback from other credit unions on their interest in using a business services CUSO and even surveyed non-credit union competitors on their pricing and how their operations were run. "Going into the study, we were under the impression that banks had deserted the small business marketplace," Ahearn said. "But what we found was banks were very interested in the market and they were offering special accounts for their customers. If there was a weakness, it was in their ability to serve the customer once they had them." Add the continued trend of bank consolidation to the mix and the idea of a business services CUSO looked even more promising, said Gary Hinrichs, chairman of Heartland and president/CEO of West Community CU. "As banks become more regionalized and nationalized, the definition of small business changes," Hinrichs said. "For some it's at least $10 million in sales or $5 million in sales. Small business owners were finding that they weren't getting the personal service they wanted because some of these banks were shipping their business decisions out of state." Another incentive for Heartland's launch was having another resource for credit unions to seek out non-traditional forms of revenue, Hinrichs said. At West Community CU, like many others, members were "sent down the road" with their requests for business loans simply because the product was not being offered. Credit unions can now collaborate to offer the loans without losing those members. "We have the expertise to do it well and credit unions are getting (savvier) in their ability to offer more products," Hinrichs said. Over the next few months, a new manager will be hired along with two other employees, who will serve as loan officers and as an administrator, said Ahearn, who will transition to a liaison role between the CUSO and the league once a permanent manager comes aboard. Heartland will lease space at MCUA's headquarters in St. Louis. Heartland currently has two levels of participation: The Class A category allows credit unions to become owners, have voting rights, and receive a patronage dividend declared by the board. Members here are also eligible to serve on the board and there may be some pricing differential between owners and users. Ahearn said credit unions do not have to be owners to use Heartland's services. The Class B category, of which MCUA and Missouri Corporate belong to, have shares in the CUSO but do not have voting rights and are not on the board of managers. At MCUA's recent annual meeting, Ahearn received a number of inquiries from credit unions interested in the CUSO's services. He is in the process of setting up meetings with those prospects. MCUA got its feet wet in business services in 2003 when it, with the assistance from the Ohio Credit Union League, developed a business deposit guide that included information on pricing and structures. From there, the Association began to look at the lending side and began its research project with the Armstrong Group. The Ohio CU League, along with seven credit unions, launched its Cooperative Business Services LLC in 2003. Heartland's entry allows small business owners to be free of the back-office paperwork that may hamper their day-to-day operations, Hinrichs said. "In many cases, the small business guy needs a lot of hand holding, they want to be able to sit down and talk to someone," Hinrichs said. "But they want less clerical hassles so they can go build their widgets. They don't want to be bogged down with bank deposits, payroll and other things. One of our challenges is how can we overcome this for them." Hinrichs said most small business owners also want to be able to spend more time with their family. "If we can meet their needs, they can have more of that time," Hinrichs said. As for community bankers who have cried foul over credit unions' headway in business lending, a few of which have raised concerns on whether the right type of people are being hired, Hinrichs said some of the movement's gains are a result of the banking industry's consolidation. "Quite frankly, the people that we're hiring are being thrown out because of consolidation and mergers," Hinrichs said. "These are the people who are saying `here's a new opportunity for me and I can bring my 20 years of experience to (the credit union industry).'" [email protected]