Business Lending Shows Strength in a Tighter Lending Environment

With 1,930 credit unions showing business loans on their books as of the 2nd quarter, member business lending continues to be a way in which credit unions are expanding services to help members.


Small business lending in the United States fuels the 99.7% of businesses that drive the nation’s economy.  Without these businesses, innovation in products and services would come to a standstill.  The continued funding of entrepreneurs and small businesses alike moves our economy forward. 

The Current State of Business Lending

Credit unions have approximately 1.6% of the market share for loans to any sized business as of mid-year 2007.  For FDIC-insured institutions, commercial and industrial loans of balances less than $1 million grew by $28.5 billion (9.6%) over the past year.  To contrast the difference between banks and credit unions, the total member business lending portfolio for credit unions stands at $21.1 billion as of June 2007. 

As of the second quarter, 1,930 of 8,410 credit unions had business loans outstanding.  This was an increase of 59 credit unions over the past year.  Overall, member business loans outstanding grew at an 18.8% year-over-year rate as of the second quarter.  With real estate lending growing at 9.7%, auto loans at 1.1%, and the credit card portfolio at 12.2%, member business lending continues to grow faster than the rest of the loan portfolio. 

As credit unions continue to gain competency in business lending, the amount they lend continues to rise.  Originations over the past five quarters show a significant increase.  Over the past four years, the amount loans year-to-date through mid-year has increased 71.4%.  Credit unions have originated $4.8 billion in member business loans through mid-year.  The experience credit unions are gaining in business lending allow them to be more confident in their ability to originate more loans each year. 

Within the MBL Portfolio

Commercial real estate loans continue to represent the vast majority of business loans at 89.1%.  This is up from 86.4% as of a year ago.  As the residential real estate market continues to cool, business investment in properties remains strong.  Outstanding balances of commercial real estate loans at credit unions increased 22.4% over the past year, compared with 9.7% in residential real estate.  Even though commercial real estate has experienced a significant jump in its proportion of total business loans, other categories are still growing as well. 

The only category experiencing a slight decrease in amount outstanding was construction and development loans.  While growing at 25.9% on a yearly basis, they declined 1.2% on a quarterly basis to $2.1 billion.  This may be where the slowing residential real estate market is being felt since overall commercial real estate experienced strong growth. 

To learn about what models credit unions are using for their MBL programs and how they have been successful, please join us for 3 Models for Achieving Business Lending Success, a webinar brought to you by Callahan & Associates.




Sept. 3, 2007



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