Business Decisions

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Business services are not a fad; in fact, business lending is the direction credit union lending is headed, according to one person.

That was the message from Larry Middleman, president and CEO of CU Business Group, a Portland, Ore.-based CUSO that was launched two years ago to help credit unions offer business services.

Too often, Middleman asserted during the California league's Big Valley Conference, credit unions deny themselves an opportunity for potentially lucrative accounts because they don't offer business services. He gave the example of a person who would like to move all of his accounts to a particular credit union. The potential member asks if the CU has services for the three owners of the business and is told "yes." He asks if accounts are available for the businesses' 12 employees and again is told "yes." When he inquires about business checking and loans, however, he hears "no."

"That third answer doesn't make a lot of sense to me," Middleman said.

CU Business Group advises credit unions to take care of businesses in a high-quality way by offering a package of services. Most companies need, at a minimum, checking accounts, merchant bankcards, and equipment or vehicle loans.

"If a credit union does a really good job of targeting one business and taking care of it, its business will mushroom," he said.

In the two years Middleman has operated CU Business Group, he has identified what he terms the "credit union niche"-businesses with one to 20 employees, with deposit accounts of $5,000 to $50,000.

Average Loan A Surprise

"When we first started, we thought the average loan would be $50,000 to $250,000. Instead, the average loan is $400,000. The amount is higher due to commercial real estate loans."

Credit unions should define their strategies and their goals before wading into business services, he continued. CUs can choose to buy loan participations, do select loans only-which he referred to as "low-hanging fruit"-or offer a complete business services program.

Once in the business services space, CUs should not compete for relationships based on price, he advised. Rather, he urged credit unions to price their products competitively, while focusing on the three advantages they do have: service, a short list of charges and stability.

"Credit unions know all about good service, and they know how to charge for the right things the right way. Stability is the biggest competitive advantage they have. Many credit unions have been in business 30, 40, even 50 years. The business person who wants the relationship will like that."

A tactical advantage CUs have over other financial institutions is the ability to practice guerrilla marketing, Middleman said. Especially if they target smaller companies the banks don't care to handle.

According to Middleman, guerrilla marketing principle No. 1 is: find a segment of the market small enough to defend and don't get too far ahead of yourself.

Principle No. 2 is: no matter how successful you become, never act like you are the leader.

"Credit unions can fly under the radar, not make a big fuss, and just pick off good accounts," he said.

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