PACOIMA, Calif.-Small credit unions need to recognize the opportunities in business lending, according to one CEO.
Antonio Pizano, CEO of $3.9-million Pacoima Development FCU, noted that "banks don't want to do loans of less than $500,000. Banks have discontinued lending to certain industries, and they are increasing fees."
According to Pizano, there is an opportunity to be had in Small Business Administration 7(a) loans, which he said "provide most or all of what credit unions need," including increased ROA and better returns than currently are available from most investments.
"Diversification also is important," he said. "Most credit unions do not offer member business loans. There is demand for small business lending because banks are not doing enough."
For those worried about exposure to loan losses, Pizano noted the SBA offers significant risk mitigation. The agency provides a guarantee of 75% to 85% of the loan amount, he said. Better yet, the guaranteed portion does not count toward the aggregate MBL cap.
"We have a window of 18 to 24 months before lenders get back into this market," Pizano predicted. "Credit unions must be innovative, and they must make this happen. Don't watch it happen or wonder later what happened."
