ALBUQUERQUE, N.M. (1/6/16)--“Yes” is a magic word for credit unions. In fact, credit unions were founded on the principle of saying “Yes” to their members when other lenders turned them away.
Nusenda CU, Albuquerque, N.M., has created a small business credit program that says “Yes” to providing local entrepreneurs with access to capital based on the unique relationships forged by cooperative principles.
The program, Co-op Capital, was initiated through the credit union’s relationship with La Montañita, a local food co-op that predominantly purchases goods from local growers, farmers, artisans and entrepreneurs. La Montañita found that opportunities to increase the sales of local growers were often stymied by production limitations.
Consider the example of a locally produced honey, which might be “flying off the shelves.” La Montañita may want to double sales, but the honey producer would need to hire another employee or purchase more equipment to scale up and meet demand.
At the same time, lenders would deny the producer access to capital based on traditional credit scoring factors.
“This made absolutely no sense to us,” Robin Brule, Nusenda CU senior vice president of community relations told News Now. “Here we’re trying to support our local economy and we have a co-op that can’t purchase produce from a local vendor. It makes no sense not to help them scale up and improve their economic mobility. That’s where the idea for this program was borne.”
Brule described Co-op Capital as “a character-based community micro lending circle.” The producer-supplier applies for credit through La Montañita, which approves and collateralizes the loan based its relationship with the co-op and “grit and determination,” rather than traditional credit factors, according to Brule. The credit union services and funds the loan.
“Everybody said we were crazy if borrowers didn’t have ‘skin in the game,’ but the skin in the game is that trusted relationship, which co-ops believe in, because the relationships are very deep,” Brule said.
In fact, the loans have a delinquency rate of less than 1%, Brule said.
Nusenda has expanded the product to serve a university that extends short-term financial help to students, an employer that provides payday alternatives loans to employees and a union that offers workforce development assistance to members.
“We have a deep commitment to our community that is aligned with the co-op principles and believe this is a product very much aligned around access and opportunity,” Brule said.
The Co-Op Capital program is a key component in addressing capital access for entrepreneurs through the Albuquerque Living Cities Integration Initiative, which seeks to improve the economic well-being of low-income people.
As a result of programs like Co-op Capital, Nusenda CU was named the Most Innovative Community-Based Banking Organization by BAI-Infosys Finacle. The award honors financial institutions that create products, invest, and deliver services to meet their community’s most pressing needs.
Brule also stresses that Nusenda CU has an organization-wide commitment to its community. “Our president/CEO (Terry Laudick) is a visionary who is completely committed to asset building and economic mobility, but we also have very streamlined processes that involve virtually every department of the credit union.
“It’s really a team dedicated to the co-op principles.”