An Education in Member Business Lending

CUNA institute brings real-world instruction to the classroom.

October 14, 2013

As he looks out into a packed classroom at CUNA’s Business Lending Certification Institute, Dana Sumner doesn’t just see engaged students—he sees future leaders.

CUNA MBL instruction

  • Business Lending & Services Conference: Determines whether offering member business services is a good decision for your credit union. Two-day session.
  • Business Lending Certification Institute: Provides a comprehensive understanding of business member services while identifying how to boost business lending potential. A three-year program, featuring four days of annual classroom instruction followed by an exam. Register now for the July 21-25, 2014 session.
  • Business Lending & Services eSchool (recorded webinar, available through Nov. 1): Provides credit unions considering MBL or services to examine all aspects of the operation.

“One of the things I always tell them is, ‘You are the future CEOs of the credit union industry,’” says Sumner, president of Development Finance Training and Consulting. “Moving forward, the CEOs are going to come from a commercial lending background. They have to because I think it’ll be so ingrained in the industry.”

About 29% of credit unions offer member business loans, according to NCUA statistics. Sumner believes economic conditions dictate that more credit unions will adopt commercial lending as a remedy to shrinking margins.

“We get a detailed look at the financial status of a lot of credit unions across the country, and one of the things we see consistently is deterioration in their traditional loan portfolios,” says Sumner. “That transcends into lower loan-to-share ratios" which results in declining income and an impaired ability to serve members.

Business lending is an opportunity, if done correctly, to boost loan-to-share ratios, generate income, serve members, and grow the credit union, he says.

MBL requires commitment

When Sumner isn’t instructing, he’s developing and shoring up credit unions’ member business lending (MBL) programs and processes. Recently, he traveled to Alabama to correct flaws that led NCUA to place a moratorium on a credit union’s commercial lending.

Joe Hyatt, CUNA MBL
Joe Hyatt: Take a holistic approach to member business lending.

MBL programs aren't for every credit union, Sumner acknowledges. Credit unions must be sufficiently capitalized, conduct market research to ensure there’s sufficient demand, and understand the risks that are involved.

“If you write off a car loan, you charge off $20,000 or $30,000," he says. "If you have an MBL that goes bad, you can be talking about millions of dollars."

This necessitates a heightened level of analysis and servicing. Even more important, management must commit to adequate staffing resources, Sumner says. “This isn’t something you can ‘kind of’ think about trying.”

You can’t underestimate the importance of a holistic approach to MBL, says Joe Hyatt, a chief credit officer for DFTC. “It's more than just making the loan—it’s servicing the loan,” he says. “It’s a community effort.”