PHILADELPHIA and EWING, N.J. — All of the traditional routes to bring business lending to members at Credit Union of New Jersey were considered, but ultimately, all agreed having a "local flavor" became the guidepost.
The $197 million CUNJ along with $553 million Philadelphia Federal Credit Union joined forces in October 2006 to form East Coast Business Lenders, LLC, a CUSO set up to help the two and other credit unions form and expand relationships with business members and select employee groups. ECBL, which opened for business in April, offers loan origination and underwriting, preparation and recording of loan documents, loan portfolio management and drafting of and annual reviews of a credit union's member business lending policy.
A few years back, CUNJ identified the need to offer business lending based on member demand and the opportunities the credit union's unique charter makeup–state and multiple, common bond–could possibly bring, said Andrew Jaeger, president/CEO. CUNJ explored the idea of offering business lending directly from within and partnering with an existing CUSO for underwriting and referring applications to it ["the cheapest and quickest way"]. The third option and the one that had legs was forming a regional member business lending CUSO "where you get the benefits of a local underwriter but are able to share the costs with other local credit unions."
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"We wanted to keep it local," Jaeger said. "This way gave us a lower cost entry into the market. There are a lot of good CUSOs that are already doing [business lending] but they're not here. That's really the flavor of keeping it local."
Philadelphia FCU's business lending and deposit program has been around for quite some time, but the timing to form a regional CUSO seemed right.
"We believe that the launching of East Coast Business Lenders, along with our expanded business depository services, will allow us to properly serve our small business marketplace,"
said James McAneney, president/CEO of Philadelphia FCU.
To be fair, there are a handful of CUSOs in the area that are serving credit unions including Keystone Business Lending Solutions, LLC, the CUSO founded by several Pennsylvania credit unions, and the Pennsylvania Credit Union Association's Business Advisory Services. Middletown, Pa.-based CU BizSource, LLC, also provides the certification process to invest in the CU System Fund, the CUNA Mutual Group creation that allows for the purchase and sale of business loans and shares.
Heading ECBL is Kathie Stone, a 25-year veteran of commercial lending and business development having worked for financial institutions located in the Delaware Valley Region surrounding Philadelphia and southern New Jersey. Stone brings experience loan structuring, pricing, closing and funding of a variety of industry related credit transactions for small to medium size businesses as well as middle market size companies in various industries. Stone said she's already noticed some slight nuances in business lending between banks and credit unions.
"The approach is a little bit different but the process is the same," Stone said. "The only thing with member business lending is the credit union in-dustry is addressing the underserved market that maybe some of the larger banks [might not have addressed]."
Stone said whether it's a $200,000 or a $2 million deal, with credit unions, "it's really about rolling up your sleeves and getting involved in member business lending." She's also noticed that the banking industry has evolved more towards credit scoring as one of its prominent decision making tools, but "whether that produces profitability for credit unions, has yet to be seen."
Meanwhile, ECBL will concentrate on serving CUNJ and Philadelphia FCU initially, the latter in the process of becoming a certified Small Business Administration lender. The CUSO is also actively looking to partner with more credit unions in New Jersey and Pennsylvania.
Jaeger said credit unions only capture 1% of the national business lending market, but most estimates show that 12-14% of members have their own businesses.
"We're constantly looking for ways to grow our loan portfolio," Jaeger said. "We have a CUSO that is available to meet with staff and members in a shared cost-environment."
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