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Raddon: Conditions Favorable for Business Lending
Friday, June 30, 2017 6:45 AM

Credit unions this year have a big opportunity to expand their business lending, according to Raddon, but a lot of that will depend on the performance of frontline staff.

Raddon reported that a number of market and economic factors that influence business lending are aligning favorably for credit unions now: new MBL rules, strong credit union membership growth and public image, in addition to growing confidence among small businesses over their own futures. The result: many are ready to expand their borrowing.

But the biggest obstacle in the way of credit unions gaining market share in business lending is that many small businesses still don’t know credit unions are business lenders that have a broad portfolio of services, said Marcus Rothaar, senior research analyst.

“In my opinion, the number-one thing credit unions need to overcome is awareness,” Rothaar said. “There is a segment of the small business community that is not aware that credit unions offer business loans. And of those who are aware, many question the credit union’s level of expertise. As simple as these things sound to address, they are big obstacles. Credit unions have to get the message out that they offer the same full line of services and have the same expertise as the big banks when it comes to business lending.”

Rothaar said data show what credit unions are up against—the six largest U.S. banks control about 60 percent of the primary business relationships nationwide.

Advertising campaigns are important, but what will really make an impact on public perception is training frontline staff, including tellers, on the basics of business lending, according to Rothaar. He said tellers should be able to converse effectively with small business members, spot needs, and understand the credit union's business offerings.

Rothaar said research indicates that tellers are the primary contact for small business members. “More than half, 52 percent, told us that tellers are their primary point of contact,” he said. “For credit union management, this clearly indicates there needs to be an enterprise-wide initiative to improve the skills of the frontline staff. They have to have a comfort level to work with business members and speak their language. They are the ones who can change the perception that credit unions either don’t offer business services or are not as skilled here as the banks.”

Other steps credit unions should be taking, according to Rothaar, are improving small business loan delivery and turnaround time and offering customized loan solutions tailored to the needs of each business.

Rothaar contends that credit unions are better equipped than the big banks to understand the needs of each individual business borrower to create customized loan offers.

Read more here.