Total member business lending at cooperatives grew by 6.4% (or $500 million) year-over-year in 1Q 2011 and is the fastest growing area of the portfolio by rate for 2010. In addition, small, local employers have generated 64% of net new jobs over the past 15 years, according to the Small Business Administration, as well as half of gross nonfarm domestic GDP.
Looks like that car repair shop down the street from your main branch could be the most important business in town. Now you have to figure out how to serve them.
"Our business members are looking for convenience,” says Shamus McConomy, vice president of member business services for GTE Federal Credit Union ($1.4B, Tampa, FL). “They’re looking for somebody who will make it easy for them, not only to transact deposits but also if they need capital, if they need some advice, if they need somebody to help them grow. They don't want to be put through a lot of hoops.” Credit unions have the grassroots resources to be those just those type of partners.
“This is the new role that credit unions hold in their communities,” says Jay Johnson, Callahan's executive vice president. “With local businesses and governments looking for new partners and ways to support the community, credit unions are the natural fit there.”
Take that car repair shop as an example. Maybe it only has one owner, but that owner needs loans from time to time to fix up the store. There’s an opportunity for a member business loan that helps your community at its most fundamental level. Maybe it only has five employees, but those men and women need a place to do their financial business. They represent five potential members. They also represent five people with roots in the community who probably funnel their money back into the community via local spending. Maybe it only has 50 or so loyal customers, but those customers need loans and financial services too. Partnering with the repair shop to be its preferred lender for people in need of big repairs makes sense on every level too. Who knows? You could get members that way too.
One small business can be the cornerstone of your member business lending. If you knock that out of the universe, then word-of-mouth can carry you the rest of the way. And there are assorted ways to get in front of small businesses. You could sponsor local sports teams, offer deals via an online coupon service or hold an event at your community’s small business administration. The key is to get your foot in the door via an MBL loan and then display the value of a full-blown relationship that includes bill pay, checking and savings accounts and mobile solutions.
Interested in a more creative way to make inroads? Try looking for other cooperatives in your community. And don’t assume that any line of business is off limits. Not even beer.
To be a player in the small business community, you need to get out into it. Start small with a meeting of your lending team to examine small businesses in your area and figure out ways to approach them. Find ways to plug into people with ideas but not the funding to turn them into reality. Then start fueling the growth.
The car repair shop down the street was once just an idea, too.