There are many benefits to a strong small business lending program. You can help your members' businesses grow, in turn helping the economic health of your community. Small business loans allow credit unions to get started in commercial lending with less risk. And small loans can serve as a gateway to strong, long-lasting member relationships.

However, to offer small business loans efficiently and effectively, credit unions must embrace one key but elusive element: The branch.

Here is a six-step roadmap to help you get started with implementing a small business lending program, leveraging your existing branch network:

1.  Determine Your Strategy

It is absolutely critical to have a solid strategy and business plan in place. And before that, you need to ensure full buy-in from the top. It's one thing to decide to begin offering million-dollar-plus CRE loans; it's a completely different story to begin offering business loans and services through your existing branch network. Such a program generally crosses traditional lines of responsibility and everyone should be part of the decision process. The board, CEO and entire senior leadership team must understand and embrace the opportunities and benefits, as well as the risks and investment required to implement a successful small business program. Create a detailed, realistic business plan with well-considered goals and scope, as well as the financial and manpower resources required. It is also important to include the exact responsibilities and expectations of branch staff and management in the plan.

2.  Select Your Products

Once the business plan is written and agreed upon, the next step is to determine what products will be offered as part of this program. We recommend four relatively simple products that are easily offered through your credit union's existing branch delivery channels based on their relatively low risk and similarity to typical consumer product offerings: Business vehicle loans, small equipment term loans, small operating lines of credit and business credit cards.

3.  Set Risk Thresholds

Your credit union should establish policy risk thresholds based on several factors, including your internal culture, appetite for risk and system capabilities. The dollar limit thresholds for each product offering may vary and should be based on your membership's needs and your credit union's appetite for risk, but an upper limit of $100,000 is generally advisable, especially when first starting out.

4.  Leverage Your Branch Staff

We recommend keeping the underwriting centralized within an internal or external expert, while empowering your branch staff to be the face of the program.

Consider designating a specially trained "branch champion" at each location. Select these champions based on their enthusiasm and outstanding sales and service skills, and train them on business products. Establish sales goals for the branch champions and they will take to it with enthusiasm.

5.  Monitor Risk

In your business lending policy, define exactly how you will monitor your small business loans on an ongoing basis. It is important to monitor risk but also to be efficient with the time you put into monitoring small loans.

With a streamlined underwriting process for loans generated through your branches, it's important to focus on loans that require very little, if any, ongoing risk monitoring and document this in your policy. Even if you decide to take a "book it and forget it" approach for business vehicle loans up to a certain dollar amount (for example), that needs to be defined in the policy.

6.  Get Ready to Scale!

Lastly, the most successful small business lending programs are designed to scale up efficiently, where you can handle 100 applications a month as easily as you handle five. To accomplish this, you need to plan for how you will build your internal and external staffing and resources to handle the growth in volume over time. You will also need to establish simple, easy-to-follow procedures and a streamlined workflow.

It's also critical to establish success metrics before you begin, such as portfolio growth, loan quality and related deposits, to ensure you stay on the right path as the program grows.

Your credit union can implement a successful branch-based small business lending program by following the above steps. To ensure a positive outcome, get senior-level, cross-departmental buy-in right from the get-go. Make partners of your colleagues in retail banking and consumer lending, and seek out their help in getting the branches engaged and excited about selling business products.

Business services can be frightening for credit union staff that don't have experience serving this unique and demanding niche. But the rewards for your team, the credit union and your members are well worth the challenge.

Larry Middleman is the Founder, President/CEO of CU Business Group, LLC

503-232-2876 or [email protected]