Business Lending Outpaces Other Loans

Strong growth and increasing demand creates an important role for member business lending in the loan portfolio.


Member business lending is a solid component of the credit union loan portfolio. According to data from Callahan & Associates’ FirstLook program, credit union member business loan balances stood at $30.5 billion in September. This is an increase of 9.1% from the previous year.

Credit unions added more than $2.5 billion in new business loans to the industry portfolio over the past 12 months. Business lending is at the forefront of credit union loan growth, as its rate of increase over the past year is greater than that of any other loan category. As MBL growth outpaces the other loan categories, it plays an increasingly important role in the overall loan portfolio. The concentration of member business loans has more than doubled over the past six years; however, at 5.4% it still represents a relatively small portion of credit union lending.

Outstanding MBL Balances and 12-mo Growth

Originations Increase
Demand for member business loans has remained strong over the past year, even as the impact of the external market has slowed overall consumer loan demand. Through September, FirstLook credit unions originated $7.4 billion in member business loans, with $2.45 billion originated in the third quarter alone. FirstLook credit unions increased year-to-date loan originations 3.0% from the previous September’s levels. Similar to growth in outstanding balances, member business loans again led the charge in originations. Through September, business loans were the only loan category where year-to-date originations increased from the previous year.

The number of credit unions that offer member business lending is one factor that is influencing the strong growth in MBL. Through September, 2,089 FirstLook credit unions reported outstanding member business loans on their portfolio. This is an increase on the absolute level; however, the trend is even more dramatic when viewed as a percentage of the total industry. Through September, 28.2% of FirstLook credit unions offer member business loans. This is an increase of nearly two percentage points over the past year and an increase of more than eight-and-a-half percentage points from where the industry stood five years ago.

Credit Unions Offering Member Business Loans

Credit for Those in Need
A recent article on CNNMoney detailed a study by the Federal Reserve Bank of New York. Nearly 60% of small businesses surveyed had applied for credit in the first half of 2010; of that group, more than three-quarters “received only ‘some’ or ‘none’ of the credit they desired.” Credit availability remains a challenge for small businesses. Providing services to these businesses will impact credit union loan growth as well as individual enterprises and local economies.