Utah-Based Member Business Lending, LLC Reaps Benefits of SBA Opening Loan Programs to Credit Unions

SALT LAKE CITY – When the SBA opened up its lending programs to credit unions back in February 2003, the idea to form a jointly-owned CUSO was not only a novel approach but it quickly took off. Member Business Lending, LLC, (MBL) is the brainchild of $1.6 billion Mountain American FCU. The CUSO offers a plethora of services including commercial real estate loans and SBA loans. It has since gone on to add other equity owners -$3 billion American First FCU; $149 million Jordan FCU; $309 million Deseret First FCU; $118 million Southern Utah FCU – including two outside of Utah, the $1 billion Premier America CU in Chatsworth, Calif.; and $553 million Numerica CU in Spokane, Wash. It may not be much of a surprise that four of the CUSO’s owners are ranked in the top 10 listing for member business lending volume considering that Mountain America is the number one SBA lender in the country. It is also the 26th largest SBA lender among all financial institutions. If goals stay on track, all of Member Business Lending’s owners will be in the top 10 by the end of September, said Kent Moon, president of MBL. “It’s been a good year and we continue to accelerate,” said Moon, who is a former bank senior vice president with 30 years of experience in SBA lending. Good may be an understatement. Non-equity owners now include $187 million Tooele FCU; $366 million Golden West FCU; $153 million Salt Lake City CU; and $141 Beehive CU. The concept of forming the CUSO, similar to the motivations for other jointly-CU owned business lending alliances, was having the ability to service members without raising what many say is an enormous amount of capital to start an independent operation. Everything from the cost of making the loan to the boost in revenues from sales to the secondary market are just a few of the advantages shared by all. MBL also provides weekly training to the credit unions and helps them develop their lending forms, and underwriting criteria to be sure the loans meet required regulations. In addition to reviewing the loans made to make sure they are in compliance with SBA and NCUA regulations, the CUSO also handles the record keeping and will sell the loans to the secondary market for the credit union. Credit unions that sign on with MBL pay a fixed fee to the CUSO monthly to cover the costs of the training and assistance they receive. When Mountain America CU formed the CUSO, it had other business loans on the books but the emphasis was on SBA loans, said Don Clark, executive vice president, financial services, and president of Mountain America Financial Services LLC, a wholly-owned subsidiary of the credit union. Clark is also MBL’s board chairman. The benefit of partnering with SBA has been the “great return on assets” and the ability to provide “an incredible amount of liquidity.” “The deposit rate was two and a half times the regular share account (rate) with an average of $15,300 per business account,” Moon said. Both Mountain America CU and America First along with the Utah League of Credit Unions made headlines in 2003 when all three fought against a proposal to make some credit unions subject to the state’s business income tax and impose limits on business lending, branching and merging. In the end, lawmakers passed a compromise bill establishing a task force to study credit union-related issues and imposing a cap on commercial loans. Shortly thereafter, both America First and Mountain America announced their intent to convert to the federal charter. Meanwhile, Utah is becoming a formidable player in the business lending arena. Credit unions here have captured 25% of the market, Moon said. According to data compiled by CUNA, 40 credit unions in Utah have outstanding member business loans with the average loan at $257,742 and total loans amounting to $444.4 million. Banks still have a healthy lead with $76.2 billion in total business loans with 39.4% of them accounting for their total assets. Still, there appears to be a shift among business owners who want more than the best rate and MBL is seeing more of them coming their way. “Why is that the case? We’re offering a better, faster way,” Moon said. “Our pricing is not that different (than banks) but we have the service. It has become a paradigm shift for banks.” Clark said going forward, MBL is looking to continue its reach beyond Utah so that credit unions can continue to reach out to other overlooked groups. For instance, Mountain America is paving a path into what many industry experts consider untapped territory: courting women business owners. The CU has launched its Women’s Financial Services Network, which will be geared towards their financial needs including small business services. According to the CU, the majority of Utah’s businesses are owned by women. To reach them, Mountain America will hold educational seminars for women’s organizations and sponsor related events. Four women students attending the University of Utah’s School of Business were recently awarded scholarships from Mountain America. [email protected]