Business Lending Opportunities to Keep Your Credit Union Sound

Every couple of months, 130 visionaries meet in Clark County, Wash., to share two things: great business start-up ideas and frustration with finding funding. The “Pub Talk” meetings sponsored by the Southwest Washington Workforce Development Council often bring together small-business owners who cannot get bank loans with angel investors willing to give them a jumpstart.

According to data from “Score,” a volunteer-based organization that advises small-business owners, small businesses are generating 60 to 80 percent of new jobs.

The entrepreneurs behind them might be a great fit for credit unions that have money to loan. But business lending, if not well-managed, gets financial institutions in hot water. The big banks love to cite a 2010 National Credit Union Administration (NCUA) report linking poor business lending practices to seven of the 10 most costly credit union failures.

According to regulators, the keys for credit unions to avoid the potential pitfalls of business lending are to have a well-mapped strategy, sound management, business lending experience and specialized training. With this in mind, the Northwest Credit Union Association (NWCUA) is offering two specialized training opportunities in 2012.

The first is an intense, one-day event, Strategic Planning & Design for your Business Lending Program, scheduled for Jan. 24, 2012. The other is The Business Lending School (TBLS), a program bringing credit union professionals together for a six separate week-long training sessions in a Federal Way, Wash., classroom, with assignments and mentoring continuing in between times at the participant’s credit union. A comprehensive exam is required for certification.

Jim Devine is one of the instructors involved in both offerings.

“The reality is that member business loans are much more complicated to underwrite and manage than consumer loans,” said Devine, who has trained thousands of lenders, accountants and regulators. “They also tend to be at least 10 times larger on average than a typical consumer loan, with a national average size now running at north of $250,000 per loan. At this size, even one problem loan creates a real challenge.”

Janet M. Powell, an Oregon regulator, can easily cite the complexities credit unions need to manage in their business lending programs. Powell manages credit union programs for the Oregon Division of Financial and Corporate Securities (DFCS).

“Different and additional loan documentation is needed than for consumer loans, such as a loan agreement, and additional extensive underwriting analysis and collateral documentation are needed,” she noted. “Resources and expertise are needed to conduct documented annual reviews, which require obtaining and analyzing at least annual financial statements and tax returns and documenting an annual on-site visit and updating the borrower’s status.”

“Training is important because it is a means of understanding concerns and learning better approaches, and it can be a springboard to further development,” Powell continued. “Business lending is very complex and can’t be learned quickly.”

The NWCUA’s one-day program will examine proven lending strategies, best practices of successful credit unions, and the risks and opportunities of business lending. Early registration continues until Dec. 23 and offers a $35 discount on the $230 tuition.

The Business Lending School represents an investment of $6,350 per candidate, but according to Devine will pay for itself with a well-run lending program.

“When you compare the cost of attending The Business Lending School to the potential downside risks, the cost/benefit logic should be an easy trade-off to grasp,” Devine said. “If the training resulted in the saving of just one average-sized business loan—$250,000—you could afford the tuition fee to send 50 staff members to The Business Lending School.”

The NWCUA has negotiated special hotel room rates and offers travel discounts on flights and rental cars to TBLS students. Registration remains open for the next class, which begins March 26, 2012, and concludes with graduation Aug. 10, 2012.


Questions? Contact Training Programs Coordinator Yuri Jung: 206.340.4817,

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