SOUTH JORDAN, Utah. - As more banks move away from small business loans, Member Business Lending LLC (MBL) is helping 28 credit unions across the U.S. cost-effectively enter the SBA market.
The fast-growing MBL CUSO serves CUs from Georgia to Hawaii with staff and processes that seek to reduce CU overhead to originate and process member business loans, shorten the time it takes to complete a loan, and improve the quality of the final product.
MBL CEO Kent Moon said the CUSO approach to business lending is the model CUs should follow. “The CUSO allows credit unions to penetrate this market at a low cost. The average ROA of all MBL credit unions last year was over 1.2%. Our CUs are doing about 20% return on assets over and above their basic asset costs.”
Credit unions save time and reduce expenses by not creating a full commercial lending program, said Moon. By working with MBL, participating CUs dedicate a “business development specialist” who is trained by MBL and works closely with the CUSO. MBL also partners with the CU to submit the application to become an SBA lender.
“We have the business lending expertise, which is something most credit unions don’t have,” Moon said. “Credit unions may have one to two people who have multiple years of straight commercial lending experience. But, more than likely, they don’t know how to do government loans. We have a staff of 27 who know all the commercial lending and government programs.”
The CU, too, doesn’t spend time establishing business lending processes or creating forms.
“We give them all of the procedures so they don’t have to invent them and we set up computer workstations so the credit union can interact with us and implement the program,” Moon explained.
While CUs tap into the CUSO’s expertise, the skills of the business development specialist aren’t overlooked. Training is provided free by MBL via WebEx or in person – the CUSO’s preference–at its South Jordan office, which is located inside a branch of the $2.3-billion Mountain America Credit Union. Specialists are graded on a scale from A through D, and if they fall below a B, MBL encourages additional training.
“We also provide training for the credit union’s member service reps on how to work with business people and complete forms,” Moon said. “Then, when it gets to the analysis of the loans, MBL works with the business development specialist to underwrite and make good credit decisions.”
For the CUSO’s support, credit unions are charged a monthly minimum, ranging from $1,000 to $3,000 depending on the CU’s size. Credit unions also pay an origination fee based on the size of each loan they close–approximately $500 for loans under $150,000 and $1,000 for loans above $150,000. Origination fees are waived on the CU’s first few loans each month until the fee total exceeds the monthly minimum.
MBL was formed in 2005 when it spun out of the Salt Lake City-Based Mountain America CU’s business lending program. And it’s growing quickly–the 13th largest SBA lender in the nation, according to Moon, who expects to serve 16 additional credit unions in 2008. For every 10 CU SBA loans generated in the U.S. in 2007, MBL closed 6.3 of them, Moon said.
“More than 63% of the national SBA volume is handled by only 17 lenders, and we are moving credit unions into this space,” Moon said. “The CUSO model is an incredible opportunity to consolidate expertise and share it collaboratively with the credit union industry.”
