With roughly 11,600 members and two branches, Santa Cruz Community Credit Union ($108M, Santa Cruz, CA) is living proof that even small organizations can have a huge impact.
In fact, as of 2Q 2014, this community development financial institution and low income-certified credit union outshines similar-size peers in loan growth and average member relationship, according to Peer-to-Peer Analytics by Callahan & Associates.
Even more impressive, Santa Cruz Community also has a thriving member business loan portfolio more than triple the average size of its peers. The median balance for these loans is just under $90,000, but loan requests frequently run closer to $250,000, reflecting the diverse needs of the community’s many startups and small-to-midsize businesses.
SCCCU Member Business Loan Balances Versus Comparable Peers
© Callahan & Associates | www.creditunions.com
Source: Callahan & Associates’ Peer-to-Peer Analytics
“We were formed to meet the needs of the underserved and to promote economic justice,” says CEO Beth Carr. “What that really boils down to is giving people the resources to build their own personal stability and success.”
Every lender has its limits, though, and where in-house efforts drop off, the credit union’s sister organization Santa Cruz Community Ventures steps in. For decades, this 501(c)(3) nonprofit has been an additional boon that allows Santa Cruz Community to say yes when other business lenders cannot.
“Most of the funds for this nonprofit are coming from community-minded businesses and individuals,” Carr says. “We then use those funds and other sources of support to make loans to those in need without placing additional risk on our balance sheet.”
CU QUICK FACTS
Santa Cruz Community Credit Union
data as of 06.30.14
12-Mo. Share Growth: 1.80%
12-Mo. Loan Growth: 22.06%
YOY Change in Avg. Member Relationship: 23.49%
Tapping In To Diverse Business Needs
Although the credit union’s footprint borders Silicon Valley and is home to many established companies, including Santa Cruz Skateboards, Santa Cruz Community also has many agriculture-oriented members with higher unemployment and poverty levels as well as more entrepreneurial business needs.
Making loans to such a wide range of borrowers with an even wider range of business models often requires taking a more extensive and consequently expensive consultative approach, which is where the non-profit truly shines.
“We had one member who had an idea for a product, and after getting the right loan, he is now able to distribute it through large chains like Lowe’s, Home Depot, and Tractor Supply Company,” says William Spearman, the credit union’s chief lending officer.
Business loans booked through Community Ventures only equal about 5% to 10% of the volume the credit union typically generates by itself. However, many of these underserved borrowers also graduate into mainstream credit union products and services over time.
“People tend to remember where those helping hands came from,” Spearman says.
Despite the financial cushion the partnership provides, Santa Cruz Community spends just as much time strategizing, underwriting, and following up on these nonprofit loans as those in its own portfolio.
“Having a 100% loan guarantee through the nonprofit allows us to do so much more as an organization,” Carr says. “But we’re also extremely careful to protect that resource and will turn down loans that won’t help someone get to the next level in their business if it means we can continue to help a larger group of people as a result.”
More Than A Lender
Community Ventures doesn’t just help the credit union secure additional funding for business loans; it also provides a wider range of consumer offerings, financial education, and practical assistance for different underserved groups.
“A lot of credit union nonprofits today are started for the purpose of getting membership as well as doing good work in the community,” Carr says. But in the case of Community Ventures, the credit union has always prioritized successful community development over any desirable balance sheet outcome for itself.
One important non-loan product that resulted from this relationship was the credit union’s individual development account (IDA), which is a specific-use savings account designed to help change the financial trajectory of low-income members.
After these members attend free financial education workshops, their IDA deposits are matched by government funds, donations, or other money the nonprofit raises. In the last year alone, Community Ventures had 361 IDA participants and 14 program graduates.
“These individuals may be saving for their first home, higher education, or other needs,” Carr says. “But we’ve also seen several successful artists, entrepreneurs, and small businesses get their start as a result of these accounts.”
In other cases, entire industries have benefited from the nonprofit’s expertise and support. For example, a subset of the organization called ChildCare Ventures is a community childcare partnership that exists solely to provide technical, regulatory, and financial support for independent home childcare businesses. So far this year, nine existing childcare providers have received assistance and two new providers have opened their doors because of these efforts.
Funds channeled from local agricultural groups to Community Ventures have also helped the credit union provide loans to cover application costs for immigrant workers seeking to become citizens.