Cornerstone Can Help Your Credit Union Meet the Moment Through Commercial Lending

The COVID-19 pandemic has led to many changes in the market, including the way consumers think about their finances. More businesses are being launched now than at any time in the past decade as American workers pursue their entrepreneurial dreams, thanks in part to the rise of pandemic-induced innovation and emerging technologies.

Amid changing spending habits and a start-up surge, credit unions are wise to consider expanding their services. Are you one of them?

Commercial lending is a great way for credit unions to meet the moment and align their business strategies with meeting their members’ needs. Your members’ business goals are changing and it’s important that you are ready to offer tangible solutions to help them succeed.

Who Offers Commercial Loans: A Snapshot

Most credit unions above $200 million in assets offer some commercial loans such as commercial real estate loans and small business loans. Large credit unions that have made business loans for years may be thinking about expanding their portfolios as the economy continues to recover from the pandemic.

Small credit unions buoyed by their newly gained experience with Paycheck Protection Program loans might also be considering expanding their business lending solutions. Keeping in line with the credit union’s cooperative model, some small credit unions may participate with other small credit unions on business loans.

Whether your credit union is considered large, small, or somewhere in between, Cornerstone Resources’ business operations consulting team is here to help. Most of our clients we currently serve are larger credit unions, with $300 million in assets or more and we are happy to accommodate all, regardless of size. We created our team to help credit unions with all their commercial lending needs, whether that is underwriting, serving as a sounding board, providing impartial third-party guidance, and starting a commercial loan program.

Our team of business operation consultants understands the ins and outs of credit union operations and our sole focus is commercial lending when working with credit unions to grow their services. Our experienced staff has been in your shoes and are no strangers to the feeling, “I have no idea where to start with this.” And we have a proven history of guiding credit unions leaders to manage projects and determine if commercial lending is suitable for their credit union.

Thinking Ahead: CECL

After the May 2020 rollout of the Interagency Guidance on Credit Risk Review Systems, we developed programs to evaluate credit unions’ loan portfolios risk management. These reviews are helping to evaluate credit risks, especially in commercial lending, to prepare credit unions for changes to their Allowance for Loan Loss Methodology with the future rollout of CECL (Current Expected Credit Loss) in January 2023.

Although the COVID-19 pandemic delayed the CECL rollout, the change is still in the works. It will replace the current incurred loss methodology guidelines that delay recognition of a credit loss until it is probable that a loss has occurred. The new guidelines will require lenders to immediately record the total amount of credit losses expected in their loan portfolios at origination. Reserving upfront will be a considerable adjustment from the current guidelines for credit unions.

How Cornerstone Resources Can Help

For large credit unions, the main concern is monitoring. You may already have the loan on the books, but are you monitoring your risk? The pandemic has had a significant impact on the economy and the financial industry. We advise you to conduct a COVID review to determine the impact on all of your commercial loans and their businesses. It’s essential to stay on top of things and change a borrower’s risk rating if necessary.

Business loans also are more volatile than consumer loans. Things could change tomorrow if there was a downturn in the economy. Ensure that your credit union conducts annual reviews to know your portfolio and stay on top of covenants.

For instance, if you offer hotel loans, you need to know how your borrowers were impacted by the downturn in travel caused by the pandemic. You also need to know your loan guarantors, who likely own several businesses, which are more affected by the economy than others.

And then there’s oil and gas. Cornerstone serves credit unions whose loan portfolio is almost entirely made up of oil and gas companies. A volatile economic landscape can change the outlook for a business overnight. Do you have the staff to keep on top of your portfolio? Do you outsource now, or do you need to?

Cornerstone Resources can help. We can tell you which roads to consider and whether a specific direction is compatible with your overall business goals. And when you come to us, you can be confident that we are looking out for your best interests. We can serve as a second set of eyes to ensure nothing falls through the cracks and provide unbiased, professional guidance to make sure your credit union is operating at its full potential.

To learn more about how Cornerstone Resources’ business operations consulting team can help, give us a call at 800-442-5762 or contact us through our website portal.