Member business loans (MBLs) are the fastest growing loan category again for credit unions in 2006 at 21.4%. Business loans are a key way in which credit unions are serving their local communities. The balance of the MBL portfolio at year-end is $19.6 billion – 3.9% of the credit union loan portfolio.
The average MBL amount has doubled since 1998 to $165,225 as of the year-end 2006. Credit unions are gaining more experience and confidence in their business lending underwriting and programs. Because of this, they have been able to develop capabilities in a range of business lending programs, such as construction and development, agriculture, and SBA loans.
SBA Lending Offers New Opportunities
According to the Small Business Administration, approximately 99.9% of the 25.8 million businesses in the United States have less than 500 employees. Small firms also create between 60-80% of all jobs in the United States. As a key driver of the U.S. economy, providing capital for their growth is essential.
As of December 2006, credit unions had $480.6 million in SBA loans outstanding. Although a small portion of the loan portfolio, SBA loans grew 110.9% in 2006. In addition, 43 credit unions started SBA lending in 2006. The partnerships between the SBA and credit unions will continue to grow over the upcoming years.
The ideals of credit unions and small business go hand in hand, helping out and standing up for the average American. For that reason, it is encouraging to see the momentum credit unions are gaining in the area of business lending.
Credit unions are continuing to build their member business lending programs. As existing members transition to new careers, it is a way to maintain long-term relationships with them. As more credit unions reach out to their community, business services allow new members to tap into the value of credit union membership.